The dollar continued to hold its footing this weak, holding a strong position compared to other currencies. This is especially the case with the Euro, which traded around its lowest point in months after being weakened by political uncertainty in the European Union.
The euro previously fell to $1.06678 on Friday, marking its lowest point since early May. The currency slightly improved on Monday to come at $1.0712 but isn’t expected to have larger gains until investors can have a better understanding of the potential budget crisis in certain parts of the European Union.
“With traders wanting certainty, this may not come until after the second-round vote (on Jul 7), so the prospect of further downside in French and (European Union) markets is real,” Chris Weston, head of research at Pepperstone, told Reuters.
The weakness of the Euro helped the dollar index stay unchanged at 105.54, which is its highest point in a month and a half, considering that the Euro accounts for 57.6% of its weight. The dollar index measures the U.S. currency against a basket of U.S. trade partners’ currencies. A higher index indicates that the dollar is stronger compared to other currencies.
The dollar is likely to remain strong on the back of a risk-averse approach by the Federal Reserve. Despite data showing softening inflation, the Fed officials predict just one interest rate cut in 2024.