The dollar strengthens as the euro wallows near recent lows; The market prepares for Chinese data

By Brigid Riley

TOKYO (Reuters) – The dollar held firm on Monday as the euro hovered near its lowest level in more than a month, amid lingering concerns about the political outlook in Europe.

The market also braced for a slew of top economic data from China, as investors looked to see how the world’s second-largest economy is struggling to gain momentum.

The euro was almost flat at $1.0703, recovering somewhat after falling Friday to its lowest level since May 1 at $1.06678. The currency also recorded its biggest weekly decline since April, down 0.88% last week.

Investors are eyeing the risk of a fiscal crisis at the heart of the euro zone, as far-right and left parties gain strength ahead of France’s snap legislative elections, putting pressure on the centrist administration of President Emmanuel Macron.

Even after French financial markets suffered a sharp sell-off late last week, European Central Bank policymakers have no plans to discuss emergency purchases of French bonds, five sources said. to Reuters.

Even though the political unrest is rather bearish for the euro, “given that the euro represents about 57% of the weighting of the US dollar index, the fall of the euro has indirectly benefited the dollar,” said Matt Simpson, senior market analyst at City Index.

The dollar index, which measures the greenback against a basket of comparable currencies, was little changed at 105.49, after touching its highest level since May 2 at 105.80 on Friday.

Minneapolis Federal Reserve President Neel Kashkari said Sunday it was “reasonable” for the U.S. central bank to cut interest rates once this year, waiting until December to do so.

The Fed released updated projections last week that showed the median forecast of 19 U.S. central bankers was for just one interest rate cut this year.

The week is light on major U.S. economic data that could help clarify the Fed’s outlook, although Tuesday’s U.S. retail sales and Friday’s flash PMIs could provide some guidance on consumption and strength economic.

“It would likely take data missing estimates by a wide margin to revive bets on further Fed cuts with the FOMC meeting still fresh in investors’ minds,” said City Index’s Simpson.

Sterling was last trading at $1.2687, up 0.04% on the day. Inflationary pressures in Britain still appear too strong for the Bank of England to cut rates at its June 20 meeting. A Reuters poll released last week showed that 63 of 65 economists thought a first cut would not come before August 1.

The yen struggled to gain a foothold after the BOJ surprised markets when the central bank announced it was keeping its bond purchases unchanged at its meeting on Friday, instead pushing back details of its tapering plan to its political meeting in July.

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Governor Kazuo Ueda, however, said he would not rule out an interest rate hike in July as the weak yen drives up import costs.

The yen was up 0.05% at 157.41 per dollar, having slipped to 158.26 after Friday’s decision, its lowest since April 29.

The yen falls to a 34-year low of 160.245 for…