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Euro weakens

Economy
Sydney - The euro dropped from a six-month high against the dollar as relief over Emmanuel Macron’s victory in the French presidential election was replaced by concern the European Central Bank will maintain currency-weakening stimulus.

The shared currency fell versus most of its major peers as Macron’s expected victory over Marine Le Pen spurred investors to take profits. ECB Executive Board member, Peter Praet said last week the region’s recent economic improvement isn’t yet sufficient reason to tighten policy. ECB President Mario Draghi will speak to the Dutch parliament on Wednesday.

“The euro is a sell on rallies above 1.10 against the dollar as the ECB’s senior leadership under Draghi and Praet remain cautious about the outlook for euro-zone inflation, while U.S. payrolls suggests the Fed will continue to hike rates,” says Mansoor Mohi-uddin, a Singapore-based strategist at NatWest Markets, a unit of Royal Bank of Scotland Plc.

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Read more: Rand weaker as dollar and euro rally 

The euro is likely to be supported on any dips, according to Peter Dragicevich, a foreign-exchange strategist at Nomura Singapore.

“The mix of an improving euro-zone economy, the looming shift by the ECB toward a tapering of its asset purchases and less accommodative monetary policy stance, and the euro zone’s large current account surplus [equal to about 3.4% of GDP] are positives for the currency,” he said.

 

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