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The Union catches its breath as it eyes Macron

The Union catches its breath as it eyes Macron

GBP
Sterling suffered its heaviest one-day fall against the Euro since early January on Monday, as investors bought back into the single currency after a run-off between two nationalist, anti-EU candidates was averted in France’s presidential race.

Another blow to the Pound came with the release of UK economic data. The UK Confederation of British Industry (CBI) Industrial Trends survey came out weaker than expected with a decline to 4 from 8 previously, although companies remained optimistic surrounding the outlook as there was a fresh gain in export orders. The survey overall maintained optimism surrounding the UK manufacturing outlook.

USD

The U.S. Dollar rose against the Pound and the Japanese Yen yesterday with virtually no market reaction after media reports said North Korea put on a massive live-fire drill overnight last night. The Dollar was unable to hold all of its gains at the 110.00 level versus the Yen and retreated to 109.70 area despite strong support from the equity markets. There was uncertainty surrounding Thursday’s Bank of Japan policy meeting, but markets are not expecting any policy change.

President Donald Trump indicated an openness on Monday to delaying his push to secure funds for his promised border wall with Mexico, potentially eliminating a sticking point as lawyers worked to avoid a looming shutdown of the federal government.

Trump is facing a Friday deadline for Congress to pass a spending bill funding the government through September, or otherwise risk marking his 100th day in office on Saturday with a government shutdown.

EUR

Data released yesterday in the form of the German IFO index, which came out better than expected at 112.9 for April from a revised 112.4 the previous month. This exceeded expectations and was the highest reading since July 2011. There was also a boost for the Current Conditions Index which maintained confidence in growth prospects, although there was a small decline in expectations.

The Bundesbank remained optimistic surrounding the outlook in its monthly survey, with expectations of stronger growth for the first quarter. Overall confidence in the eurozone outlook remained stronger following the first round of the French Presidential election.

The latest opinion polls suggest that pro-EU centrist Macron has a large lead for the second-round with at least 60% support. Le Pen polled just below 40% and announced that she would temporarily step down from her position as National Front leader in order to concentrate on the election run-off and aim to broaden her support.

Data to Watch:
9:30am GBP Public Sector Net Borrowing (Mar). 2:00pm USD S&P/Case-Shiller Home Prices Indices (YoY) (Feb), Housing Price Index (MoM) (Feb). 3:00pm USD New Home Sales (MoM) (Mar), New Home Sales Change (MoM) (Mar).

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