Euro banking on Macron Presidency
Sterling slipped against the Dollar on Friday after weaker-than-expected UK retail sales, but it stayed on track for its strongest week since November after Prime Minister Theresa May’s decision to call an early general election.
May’s announcement of a snap election in June saw Sterling surge on Tuesday by more than 4 cents to its highest level against the Dollar since October. Investors expect May to win a parliamentary majority, bolstering her position in upcoming negotiations over Britain’s exit from the European Union.
The Pound lost some of its appeal on Friday, after the biggest quarterly fall in retail sales in seven years. This added to signs that last year’s vote to leave the EU, and the price increases that came with the resulting currency slide, are finally putting pressure on consumers.
The French election has dominated headlines this morning where Centrist Emmanuel Macron has gone through to the second round of the French election, along with far-right leader Marine Le Pen. Mr Macron, a former banker, is seen as a political newcomer – and ran without the backing of an established party. After topping Sunday’s vote, he is now favourite to win the run-off on 7 May.
It is the first time in six decades that neither of France’s main left-wing or right-wing parties has had a candidate in the second round. Given renewed trust in the polling data, markets are unlikely to wait until 7 May before pricing out the risk of Frexit, and we await a volatile trading environment to start the week. In Europe, markets will turn their attention toward repricing the European Central Bank (ECB), and the better macro-economic backdrop in the Eurozone.
EURUSD opened to fresh yearly highs around 1.0920 this morning amidst a prevailing riskier context in the global markets following the results of the French elections. The momentum around the Euro has fizzled out ahead of the opening bell in Euroland, although the pair’s optimism stays intact for the time being.
The latest Commodity Futures Trading Commission (CFTC) report revealed USD net “longs” retreated to 2-week lows during the week ended on April 18. There was an announcement on Friday afternoon from President Trump that the tax proposals would be announced this week which boosted confidence in the US growth outlook. US Treasury Secretary Mnuchin commented that the tax plans would create some issues when viewed under traditional static analysis, but that a faster rate of growth would lead to the plans being revenue neutral.
In terms of data, the Chicago National Activity Index is expected along with a speech by the usually dovish Minneapolis Fed Neel Kashkari.
Data to watch: 9am German IFO Business Climate, Current Assessment & Expectations. 1.30pm Chicago National Fed Index