Dollar Holds Steady as Euro Faces French Unrest, Sterling Gains on Jobs Data
Translated & summarized from Calcalist by baba
The dollar remained stable against the shekel at 3.09, while the euro dipped slightly amid French protests and fiscal concerns. The yen strengthened against the dollar following a record Japanese bond auction. Sterling showed little change after positive UK labor data, with markets anticipating a Bank of England rate hike. Analysts suggest the dollar's current strength is temporary, with potential for euro appreciation in the coming months.
The story in 5 lines · by baba
- The dollar held steady at 3.09 shekels amid mixed global currency movements.
- French protests and fiscal concerns are creating caution around the euro.
- The yen rose against the dollar after a record Japanese government bond auction.
- Sterling remained stable following strong UK employment data and rate hike expectations.
- Analysts predict the dollar's current strength is temporary, expecting euro gains.
The dollar remained largely unchanged against the shekel, trading at 3.09, with its official rate set at 3.106. The euro saw a slight decrease, falling to 3.47 shekels from its official rate of 3.48. Against a basket of six major currencies, the dollar was stable at 101.59 points.
Traders expressed caution regarding the euro due to ongoing unrest in France, despite modest gains on Tuesday. France is experiencing widespread protests and a deteriorating fiscal situation, leading to a curfew in affected urban areas. Further demonstrations are anticipated over the weekend. "The concerns in France will not disappear anytime soon," stated Tommy von Bromssen, FX strategist at Handelsbanken, adding that negative sentiment towards France is likely to persist, with further euro weakening yet to be priced in.
The British pound also showed little movement against the dollar. This stability followed robust labor market data from the UK, indicating a resilient job market. Lala Akoner, Global Market Strategist at eToro, noted that strong employment figures could give the Bank of England reason to raise interest rates again, potentially benefiting the sterling. Markets are pricing in a nearly full 25 basis point rate hike by the Bank of England at its next meeting on November 5, according to LSEG data.
The dollar is being supported by significant inflows into the stock market, according to Dominic Bunning, Head of G10 FX Strategy at Nomura. However, he expressed skepticism about the long-term profitability of many companies and the sustainability of the current ecosystem amidst high interest rates.
In Japan, the yen appreciated by 0.3% to 158.04 yen per dollar following a record-breaking auction for long-term government bonds (JGBs). Masahiko Loo, Senior Fixed Income Strategist at State Street Investment Management, interpreted the strong demand for JGBs as a sign of returning capital and noted that Japanese bonds are becoming a relative safe haven from European political and fiscal volatility, particularly concerning France.
Economist David A. Mayer from Julius Baer believes the dollar's current strength is temporary. He cited factors like high oil prices, safe-haven flows, superior US growth performance, and aggressive Federal Reserve expectations as supportive but likely to wane. Mayer anticipates structural headwinds will become more prominent, projecting the euro to reach 1.15 against the dollar in three months and 1.20 in twelve months, despite current political and fiscal uncertainties in Europe, especially France.
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