(Bloomberg) — The dollar pushed higher on Monday amid weakness in the euro and yen, as traders digested political tensions in France and a rebound in Treasury yields.
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The Bloomberg dollar index climbed as much as 0.5%, while the common currency fell after France’s far-right party threatened to topple the government amid a stand-off over the nation’s budget. Futures for the Euro Stoxx 50 dropped 0.9%, indicating a weak open. French bond futures slipped.
“There’s certainly a political instability and the securities, the French government bonds, are pricing that instability,” Ecaterina Bigos of AXA Investment Management told Bloomberg TV. “Political instability creates uncertainty, but what is more important is what is France going to do to bring that deficit down?”
Meanwhile, Treasuries dipped as traders looked ahead to US data that may help shape Federal Reserve policy and digested hawkish comments from the Bank of Japan. The dollar was further supported by Donald Trump’s comments that BRICS shouldn’t create a currency to rival the greenback, another reminder of the US president-elect’s America-first agenda.
“A Trump presidency is going to put upward pressure on the US dollar given some of the policy stance, the tariffs and others, that he’s been talking about,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty Ltd.
“From an equity market perspective, we actually think the equity market fundamentals itself are still pretty strong,” she said, citing the US as an example.
The euro slipped as much as 0.6%. The single currency may be in for additional weakness after Governing Council member Martins Kazaks told a broadcaster that the European Central Bank should continue to cut borrowing costs.
Among key global events this week, Fed Chair Jerome Powell participates in a moderated discussion on Wednesday. Data due Friday will allow an assessment of the US jobs market.
In Asia, stocks rose on signs of economic stabilization in China. Manufacturing activity in the world’s second-largest economy expanded for a second straight month in November, according to a private survey on Monday.
The Chinese data also supported oil prices. The rallying greenback triggered a drop in the price of gold.
Key events this week:
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Eurozone Manufacturing PMI, unemployment, Monday
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UK S&P Global/CIPS UK Manufacturing PMI, Monday
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FT Global Banking Summit in London through Dec. 4, Tuesday; BOE Governor Andrew Bailey will be a panelist
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China Caixin services PMI, Wednesday
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Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
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ECB President Christine Lagarde appears before European Parliament committees, Wednesday
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Fed Chair Jerome Powell speaks, Wednesday
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OECD publishes economic outlook, Wednesday
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Eurozone retail sales, Thursday
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Germany factory orders, Thursday
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OPEC and non-OPEC ministerial meeting, Thursday
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India rate decision, Friday
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Eurozone GDP, Friday
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US unemployment, nonfarm payrolls, Friday