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Euro slips as political risk outweighs economic data

ForexApr 03, 2017 08:26AM ET
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© Reuters. The German Bundesbank presents the new 50 euro banknote at it's headquarters in Frankfurt

By Ritvik Carvalho

LONDON (Reuters) - The euro hit a three-week low against the dollar on Monday as mixed economic data coming out of Europe added to existing worries about political risk in the continent, driving investors to sell the single currency.

After moving in positive territory during morning trade in Europe, the euro turned lower minutes after noon in London, falling to a three-week low of $1.0650.

Despite increasing activity at the fastest rate in nearly six years, factories across the euro zone struggled to keep up with demand last month, according to a survey that showed them again hiking prices.

France will vote in a two-round presidential election at the end this month and at the start of May, with investors worried by the risk that the far-right anti-EU Marine Le Pen could stage a surprise victory.

Polls show Le Pen seeing off her rivals in the upcoming first round of the French presidential elections, but being beaten in the run-off vote.

"Investors are still realizing that the risks going into the French elections are still quite considerable, so there's no real opportunity to express any bullish view on the euro at this stage," said Valentin Marinov, head of FX strategy at Credit Agricole (PA:CAGR) in London.

The dollar index (DXY) - which measures the greenback against six major rivals - inched up to 100.64, just below a three-week high, leaving it up 0.1 percent on the day.

Data on Friday showed investors reduced bets on dollar strength for the first time in four weeks in the week up to last Tuesday. [IMM/FX]

Markets were eyeing the U.S. non-farm payrolls report due on Friday for clues on the likely pace of interest rate rises from the U.S. Federal Reserve.

"The real focus is going to be in the week ahead given how much data we have coming out ... which of course is absolutely key in trying to assess whether we will see another hike from the Fed in June," said Rabobank currency strategist Christian Lawrence in London.

A spate of mixed U.S. economic data on Friday reinforced the Fed's view that the economy is growing at a steady but not rapid pace.

Investors also parsed comments from Fed officials on Friday, some of which pressured the greenback. Markets are currently pricing in more than a 50 percent chance that the central bank will hike interest rates at its June meeting, the second of the three increases expected this calendar year.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

Euro slips as political risk outweighs economic data

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