Euro up as RN party leads in first round of France election

The gain in the euro sent the dollar a touch lower against major currencies, though the dollar was also reeling from data on Friday that showed U.S. inflation cooled in May

The euro gained on Monday after the first round of France's snap election put the far-right in leading position, though by a smaller margin than expected, while the yen struggled to break away from a near 38-year low.

Marine Le Pen's far-right National Rally (RN) party won the first round of France's parliamentary elections on Sunday, exit polls showed, although analysts noted the party won a smaller share of the vote than some polls had initially projected.

The euro, which has dropped nearly 0.8% since President Emmanuel Macron called the election on June 9, was last 0.4% higher at $1.0756, after having reached two-week top earlier in the session.

They (RN) have actually performed a little bit worse than what was expected, according to Carol Kong, a currency strategist at Commonwealth Bank of Australia.

She said: As a result of that, we saw the euro gain modestly in early Asian trade just because we might actually get less fears of more expansionary and unsustainable fiscal policy if the far-right party did a little bit worse.

The gain in the euro sent the dollar a touch lower against major currencies, though the dollar was also reeling from data on Friday that showed U.S. inflation cooled in May, cementing expectations the Fed will begin lowering interest rates later this year.

Market pricing now points to around 63% possibility of a Fed cut in September, as compared to a 55% possibility a month ago, as per the CME FedWatch tool.

Against the dollar, sterling added 0.11% to $1.2659, while the Aussie slipped 0.07% to $0.66655.

The New Zealand dollar rose 0.12% to $0.6098. The dollar index was down 0.11% to 105.61, having earlier reached a one-week low.

Should inflation continue to behave itself, and incoming data fall in line with the FOMC's forecasts, through the summer, the first 25-basis point cut remains on the cards as soon as September, according to Michael Brown, senior research strategist at Pepperstone.