Political developments around the world continue to be a significant factor behind fluctuations in the international markets. Recent news in both the U.S. and France have resulted in the euro hitting a six-month high against the dollar, forecasting service Page Trader notes. On May 8, the euro rose to $1.1024, later falling to $1.0984. It surpassed that mark nearly one week later, “trading up as much as 0.6 percent on the day and reaching $1.10365 (its highest since Nov. 9)”, as political turmoil and doubts over the raising of interest rates pressured the U.S. dollar. European shares appear “set to advance, with financial spread betters expecting a 0.9 percent gain in France’s CAC, up 0.8 percent in Germany’s DAX and 0.4 percent higher in Britain’s FTSE”, according to Reuters financial reporter Hideyuki Sano.
The boost in the euro was largely a result of positive news out of France, contrasted against the continuation of negative stories centered around the Donald Trump administration in the United States. Investor relief was apparent after centrist Emmanuel Macron easily won the French presidential election on May 7. Macron’s victory brought comfort to economists and European allies, both of which had shown nervousness about the possibility of another populist uprising, such as Britain’s vote to leave the EU, and Trump’s victory in the 2016 presidential election. “Macron’s victory over Marine Le Pen had been widely anticipated, as the polls predicted a comfortable lead for him in the aftermath of the first round,” global economist Anna Stupnytska told The Independent. “It is certainly positive for markets, removing a major source of uncertainty that had dominated investors’ minds over the past few months.”
The strengthening of the euro can also be somewhat attributed to the ongoing market concerns involving the White House, according to Page Trader. The Dollar Index, which tracks the greenback against its six major rivals, fell 0.1 % on May 22 to trade at 97.011, its lowest since Nov. 9. The latest weakness was mainly due to worries that Trump’s growing distractions from an ongoing federal investigation into his 2016 campaign could prevent a successful push of the administration’s proposed financial stimulus program. Meanwhile, investors are now focusing on when and how the European Central Bank (ECB) could scale back its quantitative easing, mainly due to the strength in the region’s economy. “Long positions in the euro tend to be favoured now, given the chances that the ECB could discuss the possibility of future policy changes at its upcoming June meeting,” said Shinsuke Sato, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo. “Overall, there seems to be a mood of looking for chances to buy (euros) on dips.”
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