(Bloomberg) — The dollar pushed higher as the crisis swirling around the French government deepened, dragging on the euro. Treasuries fell as traders prepared for US data that may influence the outlook for interest rates.
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In stocks, US futures posted small moves, suggesting a pause in the rally that just produced the S&P 500’s strongest month of the year. In Europe, Stellantis NV shares plunged more than 8% after Chief Executive Officer Carlos Tavares stepped down from the automaker following a dispute with the board.
The Bloomberg dollar index climbed 0.5%, while the euro fell as the French government sought to avoid being toppled by the far-right in a stand-off over the nation’s budget. French bonds and stocks bounced back after Prime Minister Michel Barnier offered final-hour concessions on some demands from Marine Le Pen’s party.
“There’s certainly a political instability and the securities, the French government bonds, are pricing that instability,” Ecaterina Bigos of AXA Investment Management told Bloomberg TV. “Political instability creates uncertainty, but what is more important is what is France going to do to bring that deficit down?”
Meanwhile, Treasuries dipped as traders looked ahead to fresh readings on the US economy that may help shape Federal Reserve policy. The dollar was further supported by Donald Trump’s comments that the BRICS nations shouldn’t create a currency to rival the greenback, another reminder of the US president-elect’s America-first agenda.
“A Trump presidency is going to put upward pressure on the US dollar given some of the policy stance, the tariffs and others, that he’s been talking about,” said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners Pty Ltd.
While the dollar has gained about 2% since the Nov. 5 election, December is typically a month that has punished the greenback. The dollar posted losses in eight of the last 10 Decembers, often a victim of year-end portfolio rebalancing flows and the so-called Santa Rally that emboldens traders to sell dollars for riskier assets like stocks.
And the chances of sudden price swings are greater this time around with the risk of Trump’s social media posts roiling markets, unnerving traders in a month that also has nine major central bank policy meetings and a deluge of key economic data.
Among global events in focus this week, Fed Chair Jerome Powell participates in a moderated discussion on Wednesday. Data due Friday will offer an assessment of the US jobs market.
