Forex – Euro comes off day’s lows, dollar index gives back gains

The euro pulled back from the day’s lows against the dollar and the yen on Tuesday, after weakening broadly earlier as European geopolitical fears sapped risk appetite.

EUR/USD was at 1.1163 by 06.22 ET, after falling as low as 1.1108 earlier.

The single currency came under pressure in early trade as worries over Greece’s bailout, the prospect of early Italian general election and European Central Bank President Mario Draghi’s comments about the need for continued stimulus all weighed.

The euro found some support after data showing that France’s economy grew at a faster rate in the first quarter than first estimated.

Statistics body INSEE reported that French GDP expanded by 0.4% in the three months to March, up from the preliminary estimate of 0.3%.

That means the French economy grew twice as fast as the UK economy at the start of the year, giving a boost to new president Emmanuel Macron.

EUR/JPY was last at 123.92, still off 0.24% for the day after falling to 123.16 earlier, the lowest level since May 18.

The dollar was also weaker against the safe haven yen, with USD/JPY down 0.22% at 111.01.

In Japan, data on Tuesday showed that labor demand rose to its highest in more than 40 years in April while the unemployment rate held steady at a two-decade low.

The data bolstered optimism that tighter labor market conditions could help spur weak consumer spending and inflation.

Sterling pushed higher, with GBP/USD rising 0.15% to 1.2859, but gains were held in check as the election race in the UK tightened, adding to political risk around Brexit.

Recent polls have indicated that Prime Minister Theresa May’s Conservative Party has less of a lead over the Labor Party than expected.

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