The euro rose 0.1% to $1.1234 on Wednesday but remains down nearly 1% for the month as FX desks price in persistent political and fiscal friction in France. Currency markets otherwise saw small moves ahead of a run of central bank decisions between October 28 and 30.
The euro climbed 0.1% to $1.1234 on Wednesday, extending a slight rebound into a second straight session. The single currency nonetheless extended its monthly decline to nearly 1%.
Meanwhile, the U.S. dollar index, which tracks the greenback against six major peers, climbed 0.1% to 101.78. A light U.S. economic calendar and a Federal Reserve blackout period ahead of next week's decision left currency participants with few news catalysts.
French unrest keeps the euro on fragile footing
FX desks priced in persistent political and fiscal friction in the eurozone's second-largest economy. The French government confirmed Tuesday it will deploy military personnel alongside police forces ahead of fresh nationwide protests scheduled for Saturday.
Persistent social instability has pushed French 10-year borrowing costs toward 24-year highs. Robin Brooks, senior fellow in economic studies at the Brookings Institution, said France received big inflows from foreign investors over the summer, so a positioning unwind is under way as they scale out of their positions.
Sterling and yen move slightly before central bank meetings
Sterling inched up 0.1% to $1.3396, a day after a 0.6% surge. The Japanese yen firmed slightly to 158.10 per dollar, while traders stayed cautious of intervention by Tokyo authorities.
Several central banks will issue rate decisions between October 28 and 30. The Bank of Japan is anticipated to hold its key policy rate at 1.25%, and money markets widely expect the Fed to leave its rate unchanged at 3.75%–4.00%.
However, JPMorgan analysts led by Maia Crook said they expect every DM central bank they track to hike within the next six months, with the exception of Australia.
Source: Investing.com
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