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Euro Dips 0.3% Post-EU Vote, Global Markets Mixed

Euro falls 0.3% post-EU elections; Asian markets mixed, Japan's Topix up 0.7%, US 10-year yield near 4.45%.

6/10, 00:13 EDT
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Key Takeaway

  • The euro fell 0.3% against the dollar post-EU elections and Macron's call for a snap legislative ballot, impacting French bond futures.
  • Asian markets were mixed; Japan's Topix rose 0.7%, while other major markets were closed for holidays.
  • Global bond markets face headwinds from European election results and upcoming FOMC, BOJ meetings, and US inflation report.

Euro Declines Post-Election

The euro fell to its lowest level against the dollar in nearly a month following the European Parliament elections and French President Emmanuel Macron's call for a snap legislative ballot. The common currency dropped as much as 0.3%, retreating alongside French bond futures. Gains for a far-right party in the vote, which were in line with expectations, led Macron to call for the snap vote. Despite this, centrist parties are set to maintain their majority in the European Union-wide ballot. The Bloomberg Dollar Spot Index rose for the third consecutive day, and the yield on 10-year Treasuries added a basis point to near 4.45%.

Asian Markets Mixed

Asian currencies, including the South Korean won and the Malaysian ringgit, declined following a strong US jobs report from Friday. Japan's Topix index rose by 0.7% after data showed the country's economy contracted less than initially estimated. However, the MSCI Asia-Pacific stock index was slightly lower. Markets in China, Hong Kong, Taiwan, and Australia were closed for holidays. Lorraine Tan, director of Asia equity research at Morningstar Inc., commented, "We’re still expecting a soft landing in the States — as long as that’s a scenario, I think Asian markets have upside potential."

Bond Market Reactions

Global bond markets faced additional headwinds from early weakness in European bond futures after the snap French elections were called. This adds to the risks from this week's Federal Open Market Committee (FOMC) and Bank of Japan (BOJ) meetings, as well as the upcoming US inflation report. Early moves in bond futures suggest a potential widening of the spread between German and French 10-year debt, which could become a sentiment indicator for European risk assets. Trading volumes are modest so far, but a stronger reading is expected once European cash markets open.