US Dollar had a rocky start to the week, but it is down early on Monday.

The US Dollar (USD) fluctuated on Monday as markets celebrated the results of the second round of French elections.

The unexpected victory of France’s left-wing coalition has made headlines.

In an unexpected move, Jean-Luc Mélenchon’s left-wing coalition New Popular Front triumphed and claimed victory. With current French President Emmanuel Macron’s centrist Ensemble alliance coming in second. This is a stunning blow to Marine Le Pen’s far-right National Rally. Who won by a landslide in the first round of elections last week. With no one possessing an outright majority and political agendas so fragmented. That there is little common ground, a hung parliament or minority administration appears to be the only viable option for the time being. Nonetheless, the far-right movement looks to be stalled.

On Monday, all eyes will be focused on the bond market and the spreads between France and Germany. On the economic front in the United States, the week has begun with relative tranquility. Jerome Powell, Chairman of the US Federal Reserve (Fed), will testify before the Joint Economic Committee on Tuesday and Wednesday about the economy and recent monetary policy initiatives. That is barely ahead of The US Consumer Price Index (CPI) statistics for June will be released on Thursday.

Daily Market movers: Bond markets happy. US Dollar index is hovering around 105.00, testing an important level of support.

As previously stated, a hung parliament in France appears likely; yet, the far-right trend appears to have stalled. This leads to a decrease in yield margins between France and Germany. The disparity between the two 10-year government bond yields increased to 81 basis points last week, while Marine Le Pen’s far-right party was in power. The margin has already narrowed to 65 basis points, with an average spread of roughly 50 basis points in typical conditions.
Markets are cheering the impasse because the far-left party lacks a majority to pass its large and wasteful spending agenda. Actually, not any party. will be allowed to push through any type of reform until the next presidential elections, which will take place on April 11, 2027.
Over the weekend, more democratic prominent figures in the United States spoke out, urging President Joe Biden to quit and make room for someone else.
At 15:30 GMT, the US Treasury Department will auction a 3-month and 6-month bill.
The US Consumer Credit Change for May is predicted to increase to $8.65 billion from $6.4 billion.
All major indices are somewhat negative, hoping for direction from Asia or Europe into US futures. This Monday might be a tumultuous and rough ride.
The CME Fedwatch Tool strongly supports a rate decrease in September, despite recent comments from Fed officials. The probability of a 25-basis-point decrease are now at 69%. A rate pause is 26.1% likely, while a 50-basis-point rate drop is a remote 4.8% likelihood.
The 10-year benchmark rate in the United States is currently trading at 4.29%, close to its weekly low.