(Bloomberg) -- The dollar has been flirting with a new 2024 high, supported by investors seeking shelter from political uncertainty in Europe even amid evidence of a slowing economy in the US. 

The Bloomberg Dollar Spot Index hovered around a mark just shy of levels seen last November as technical indicators reveal the greenback’s strength has room to run. The premium paid to hedge against the US currency gaining relative to falling over the next three months against a basket of peers has risen to the highest level in over a year. 

“Near term, the greenback safe haven appeal could be the catalyst for a topside break,” said Rodrigo Catril, a strategist at National Australia Bank Ltd. in Sydney. While the political uncertainty in France appears to be taking a “breather” for now, “markets like to shoot first and ask questions later — so over coming weeks the French political uncertainty is dollar supportive.”

Leaders of France’s left-wing parties have called for unity in their first campaign rally and European Central Bank officials see no cause for alarm in the market turmoil that gripped the nation last week. The moves have helped soothe investors’ jitters, though many remain on high alert for any turn in sentiment that could reignite a stampede for the greenback.

The dollar has advanced for the past four weeks as high US interest rates and the recent political upset bolsters the appeal of the currency. A break through its medium-term weekly downtrend was also a bullish signal for investors.

On Tuesday, however, the dollar’s advance took a breather. The currency slipped alongside Treasury yields after a reading of US consumer spending in May came in weaker than estimates alongside a downwardly revised tally for April. The safe-haven Swiss franc led Group-of-10 gains against the greenback after the retail sales report, underscoring the appeal of other sanctuary currencies. Traders priced higher odds of two Federal Reserve interest-rate cuts this year. 

Traders may be walking a tight rope if data continues to show signs that the world’s biggest economy is cooling, ratcheting up risks the Fed may cut rates sooner than markets are expecting.  

“I’m bullish on the dollar given the amount of political risk out there, very soft bullish,” Sarah Ying, head of foreign-exchange strategy at CIBC Capital Markets, said after the release of the retail sales data. “It is counterbalanced by the Fed narrative. It’s hard to be a hyperbull at this stage in the cycle.” 

--With assistance from Carter Johnson, Anya Andrianova and Cristin Flanagan.

(Updates throughout after US retail sales, adds CIBC comment.)

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