Dollar Surges Euro Hits 17-Month Low on France Fiscal Worries
The US dollar surged on Monday, boosted by strong Treasury yields despite a weaker-than-expected jobs report that lowered expectations of a Federal Reserve rate hike in October. The euro fell to a 17-month low, dropping 0.7%, as concerns over France's high debt levels and political gridlock ahead of next year's presidential election weighed on the currency.
The widening gap between French and German bond yields has raised fears that the turbulence in French markets could spread across Europe. Meanwhile, global stock markets showed positive momentum, with European markets poised for a strong start. Trading in Asia was lighter due to holidays in China, South Korea, and Australia's New South Wales, but MSCI's Asia-Pacific shares index rose 1%, and Tokyo's Nikkei climbed 2.5%.
Investors now see less than a 20% chance of a Fed rate hike in October, though a December move remains likely. In Japan, the 30-year government bond yield hit a record high ahead of Prime Minister Sanae Takaichi's remarks at an extraordinary parliamentary session. Meanwhile, Brazil's markets braced for volatility after right-wing senator Flavio Bolsonaro advanced to a runoff against President Luiz Inacio Lula da Silva.
The International Monetary Fund announced a staff-level agreement with Sri Lanka on the seventh review under the Extended Fund Facility, unlocking about $345 million in financing. Key economic data releases for Monday include France and Germany's S&P services and composite PMI for September, as well as Euro zone producer prices for August.