Forex – Euro Holds Steady after EU Election Results, Pound Ticks Higher

Forex - Euro Holds Steady after EU Election Results, Pound Ticks Higher – The euro was holding steady on Monday after the results of European Union parliamentary elections showed that pro-EU parties held on to two-thirds of seats, limiting the gains of their euro skeptic opponents.

EUR/USD was little changed at 1.1199 by 03:31 AM ET (07:31 GMT), close to one-and-a-half week highs, having pulled away from Thursday’s two-year trough of 1.1105.

While center-right and center-left blocs are losing their shared majority, surges in the Greens and liberals meant parties committed to strengthening the union held on to two-thirds of seats, official projections showed.

The results dented the hopes of anti-immigration, anti-Brussels National Rally led by Marine Le Pen, Italian Deputy Prime Minister Matteo Salvini and others who have been opposing attempts to forge closer EU integration.

“The often-feared rise of EU-skeptical parties has not materialized,” Bert Colijn, senior Eurozone economist at ING said in a note. “The gains are simply too small and it does not look like the parties are set to unite themselves more than they did in the previous parliament.”

Trade remained thin on Monday amid market holidays in the U.K. and the U.S.

The dollar pushed higher against the yen, with USD/JPY rising 0.25% to 109.54 underpinned by Japanese players’ bargain-hunting.

Buying interest from Japanese investors is strong when the dollar dips near 109 yen, said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

“Data shows Japanese investors bought a large amount of foreign bonds a few weeks ago when the dollar fell near 109 yen. There’s demand from Japanese companies that need dollar for their M&A deals,” he said.

The dollar index ticked up to 97.532, remaining below the two-year high of 98.260 reached last Thursday.

The greenback was pressured lower late last week as weak U.S. economic data fueled fears that the escalating trade and tech war between the U.S. and China is hitting growth.

The pound was slightly higher against the dollar, with GBP/USD up 0.1% to 1.2727, having regained some ground after Prime Minister Theresa May announced a date for her departure, rebounding from the four-and-a-half month low of 1.2605 reached on Thursday.

But the prospect of a no-deal Brexit was fast becoming the central battle of the race among contenders to succeed May, with four of eight leadership hopefuls having said Britain must leave the EU on Oct. 31 even if no deal is in place.

Sterling was almost unchanged against the euro, with EUR/GBP trading at 0.8798.

–Reuters contributed to this report


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