Authors: Kevin Buckland and Alun John
TOKYO/LONDON (Reuters) – The euro marked its moment on Wednesday as a no-confidence vote in France looms, while the Australian dollar fell to a four-month low as economic growth slowed and a win rebounded after South Korea’s president stepped down following a statement martial law.
Europe’s single currency was steady at $1.0499 and 82.83 pence ahead of French lawmakers’ no-confidence vote that is certain to topple Prime Minister Michel Barnier’s frail coalition.
The debate is scheduled to start at 4 p.m. in Paris (3 p.m. GMT), with the vote expected about three hours later, parliament officials said.
Removing Barnier would deepen the political crisis in the euro zone’s second-largest economy and could further weigh on the euro, which has fallen sharply since Donald Trump’s victory in November’s U.S. presidential election.
“Unfavorable political developments in France continue to pose a downside risk to the euro, although they are not necessarily sufficient to trigger another decline on their own,” MUFG analysts said.
European observers are also closely watching for ECB President Christine Lagarde’s later afternoon remarks.
The Australian dollar fell 1.22% to a four-month low of $0.6407 after data earlier on Wednesday showed the economy grew at its slowest annual pace since the pandemic in the third quarter.
Markets have started fully pricing in an interest rate cut in April next year with a 73% chance earlier.
“Weakness in annual spending growth and continued pressure on household disposable income – even with upcoming tax cuts – point to a weaker picture,” said Pat Bustamente, senior economist at Westpac.
SOUTH KOREA
Investors also focused on the win for South Korea, which made up for some losses on Wednesday after falling overnight after President Yoon Suk Yeol announced martial law, which was lifted a few hours later.
The dollar was last down 0.6% at 1,416 won, after jumping 1.6% overnight. But politics remained in the spotlight, and South Korean lawmakers introduced a bill on Wednesday seeking to impeach Yoon.
Dealers say the country’s central bank could have supported Wednesday’s opening win by selling dollars.
“In the near term, you have to think that it will be difficult for the winner to achieve particularly good results. (There is) a terrible structural backdrop, the domestic economy looks weak, the central bank is likely to step in and do more (easing) than previously expected, and on top of that there is a political malaise,” said Rob Carnell, regional head of research for Asia Pacific at ING.
“The fact that, overall, the dollar looks stronger than everything else (makes) it almost a perfect storm.”
The dollar also strengthened against the Japanese yen, gaining 1% to 151.20 after media reports raised doubts about market expectations for the Bank of Japan to raise interest rates this month, sending government bond yields lower. [JP/]
On developments for the dollar, the currency gained some support on Tuesday after data showed U.S. job openings rose moderately in October while layoffs fell, even though Federal Reserve officials did not provide final guidance on the what they intend to do at the end of the next political meeting in two weeks.
Traders are waiting for monthly payrolls data on Friday for more clues on the interest rate outlook, while a private payrolls report due on Wednesday will provide a preview of sorts.
According to CME’s FedWatch Tool, the market risk of a quarter-point rate cut on December 18 was 74%.
Sterling held steady at $1.2665 after briefly falling following comments from Bank of England Governor Andrew Bailey.
