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Forex Today: Political concerns weigh on the Euro, the US dollar continues to rise

Here’s what you need to know to trade today Monday June 10:

The US Dollar (USD) maintains its strength, while the Euro struggles to find demand at the start of the week, as markets evaluate the preliminary results of the European Parliament elections. Sentix investor confidence for June has turned out to be positive after 27 negative months. The US economic calendar will not offer high-impact data releases ahead of Wednesday’s key Consumer Price Index (CPI) numbers and monetary policy announcements from the Federal Reserve.

US Dollar PRICE last 7 days

The following table shows the percentage change of the US Dollar (USD) against the major listed currencies in the last 7 days. The US Dollar was the strongest currency against the Canadian Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.78% 0.14% -0.22% 1.00% 0.84% 0.36% -0.72%
EUR -0.78% -0.60% -1.00% 0.21% -0.06% -0.42% -1.51%
GBP -0.14% 0.60% -0.32% 0.82% 0.61% 0.13% -0.91%
JPY 0.22% 1.00% 0.32% 1.20% 1.10% 0.73% -0.34%
CAD -1.00% -0.21% -0.82% -1.20% -0.19% -0.63% -1.72%
AUD -0.84% 0.06% -0.61% -1.10% 0.19% -0.36% -1.47%
NZD -0.36% 0.42% -0.13% -0.73% 0.63% 0.36% -1.13%
CHF 0.72% 1.51% 0.91% 0.34% 1.72% 1.47% 1.13%

The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will represent USD (base)/JPY (quote).

Strong US labor market data triggered a rally in US Treasury yields and provided a boost to the USD. The benchmark US 10-year yield gained more than 3% on Friday and the USD index rose 0.8% to end the week in positive territory. Early on Monday, the USD index continues to rise and is trading at its highest level since mid-May, slightly above 105.20. Meanwhile, US stock index futures are trading modestly lower on the day after posting small losses on Friday.

The US Bureau of Labor Statistics reported that Nonfarm Payrolls increased by 272,000 in May. This reading followed the increase of 165,000 recorded in April and far exceeded the market expectation of 185,000. Additionally, annual wage inflation, as measured by the change in Average Hourly Earnings, rose 4.1%, exceeding analysts’ estimate of 3.9%.

According to preliminary results, the European People’s Party became the clear winner, winning 8 seats to secure a total of 184 seats in the European Parliament. In Germany, the main conservative opposition party, CDU, received 30% of the vote, while the far-right Alternative for Germany (AfD) party received almost 16% of the vote, beating Chancellor Olaf Scholz’s SPD. Populist Prime Minister Giorgia Meloni and her far-right Brothers of Italy party won 29% of the vote in Italy and the far-right Freedom Party (FPÖ) in Austria won with 25.5%. French President Emmanuel Macron said far-right parties in Europe were “progressing across the continent” and called for early elections after Le Pen’s National Rally won 31.5% of the vote to 14.5%. % of the Besoin d’Europe alliance, which includes President Macron’s Renaissance.

The Euro Stoxx 50 index is down more than 1% in the early European session, Germany’s DAX 30 loses 0.6% and France’s CAC 40 index falls more than 1.5%. Meanwhile, the Euro is struggling to keep up with its rivals, with the EUR/USD trading deep in negative territory, slightly above 1.0750.

After falling sharply on Friday, the GBP/USD remains stable above 1.2700 in the European morning. The UK’s Office for National Statistics will release employment data on Tuesday.

He USD/JPY It gained more than 0.7% on Friday, but appears to struggle to gather bullish momentum on Monday. At press time, the pair is trading marginally higher on the day, around 157.00.

He Gold lost more than 3% on Friday and posted one of its biggest daily losses of the year. The broad-based strength of the US Dollar, the rebound in US yields and the news that China’s central bank stopped purchases of Gold in its reserves for the first time in 18 months weighed heavily on the XAU/USD. On Monday European morning, Gold is trading slightly below $2,300.

Risk Sentiment FAQ

What do the terms “risk-on” and “risk-off” mean when referring to sentiment in financial markets?

In the world of financial jargon, the two terms “risk appetite (risk-on)” and “risk aversion (risk-off)” refer to the level of risk that investors are willing to bear during the investment period. reference. In a “risk-on” market, investors are optimistic about the future and are more willing to buy risky assets. In a “risk-off” market, investors begin to “play it safe” because they are worried. for the future and, therefore, buy less risky assets that are more certain to provide a return, even if it is relatively modest.

What are the key assets to follow to understand risk sentiment dynamics?

Typically, during periods of “risk appetite”, stock markets rise, and most commodities – except gold – also appreciate as they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials strengthen due to increased demand, and cryptocurrencies rise. In a “risk-off” market, Bonds rise – especially major government bonds -, Gold shines and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar benefit.

Which currencies strengthen when sentiment is “risk-on”?

The Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD) and minor currencies such as the Ruble (RUB) and the South African Rand (ZAR) tend to rise in markets where there is “appetite for risk.” This is because the economies of these currencies rely heavily on commodity exports for their growth, and these tend to rise in price during periods of “risk appetite.” This is because investors anticipate higher demand for raw materials in the future due to increased economic activity.

Which currencies strengthen when sentiment is “risk averse”?

The major currencies that tend to rise during periods of “risk aversion” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The Dollar, because it is the world’s reserve currency and because in times of crisis investors buy US public debt, which is considered safe because it is unlikely that the world’s largest economy will go into default. The Yen, due to the increase in demand for Japanese government bonds, since a large proportion is in the hands of domestic investors who are unlikely to get rid of them, even in a crisis. The Swiss franc, because strict Swiss banking legislation offers investors greater capital protection.

Source: Fx Street

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