Investors have been contemplating the risk of a budget crisis at the heart of the euro area, as far right and leftist parties gain momentum ahead of France's snap parliamentary election, pressuring President Emmanuel Macron's centrist administration.
"With traders wanting certainty, this may not come until after the second-round vote , so the prospect of further downside in French and EU markets is real," Chris Weston, head of research at Pepperstone, said. Minneapolis Federal Reserve President Neel Kashkari said on Sunday it was a"reasonable prediction" that the U.S. central bank would cut interest rates once this year, waiting until December to do it.
Sterling fell 0.1 per cent to $1.267. Britain's inflation pressures still appear too hot for the Bank of England to cut rates at its June 20 meeting, with a majority of economists polled by Reuters forecasting the first cut would not come until Aug. 1. "The sense was that raising rates and tapering are two separate things" that the BOJ would decide whether or not to do based on different criteria, he said.
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