Macron’s Landslide Spikes Euro
Sterling has hit a six-month high against the Euro last night, after the news of Emmanuel Macron’s landslide in the French presidential elections. This also strengthened the Pound, but it’s resilience isn’t expected to last over the coming months. Macron’s pro-EU position is probably going to increase the Union’s hard Brexit stance when the UK begins negotiating with the EU, which could weaken the Pound.
The US Dollar rose against the Euro after a three-week decline due to record-low unemployment rates released on Friday and Sunday’s French election news. Investors are confident that the Federal Reserve will raise interest rates in June, so the Dollar is set for a good week, unless the inflation or retail sale reports prove disappointing.
Pound Sterling – UK Markets
On Monday, Sterling continued its good performance against the Euro, gaining 0.2% in value. The Pound to Euro exchange rate was set at €1.18, slightly higher than Friday’s closing. Sterling gained ground, despite Emmanuel Macron’s victory in the French presidential elections on Sunday. According to analysts, Macron is considered a pro-EU politician and it’s uncertain if he will choose a hardliner’s stance in the upcoming Brexit negotiations.
Sterling remained stable against the US Dollar at $1.29, which marks the highest rate since September 2016. Gains in the UK Manufacturing and Services PMI figures and the uncertainty around the FED’s path to rate hikes helped the pair to retain the current level. On Wednesday, the Bank of England Monetary Policy Committee is expected to keep the interest rates at 0.25%, but attention should be given to the BoE’s economic outlook for the next months, during which the Brexit negotiations with the EU will start.
US Dollar – US Markets
The US Dollar strengthened against the Euro with the exchange rate between them set at €0.91. Traders had already priced in Macron’s victory in France, while the improved data, reported last week, regarding the state of the US’s economy seem to have helped the US Dollar.
The unemployment rate has dropped to 4.4%, which is the lowest level since 2007. Despite job growth, consumer consumption has been weak. The Federal Reserve is expected to use the data to bolster the case for continued rate hikes. Market analysts are certain that the Fed is going to raise the rates in June. Some of them suggest that if job growth is sustained at this rate, a second rate hike might be possible by the end of the year.
Euro – European Markets
The Euro hit a six-month high against the US Dollar last night, rising up to $1.10. The surge had come just after the first results of the French presidential elections, indicating Emmanuel Macron as the new French president. The single currency also reached a one-year record high against the Yen at ¥124.59.
However, the boost was temporary. The outcome of the elections was expected and the markets quickly calmed down, since they had already priced in the results. Early this morning, the Euro dropped 0.2% against the US Dollar and was trading at $1.09. It also slowed down against the Yen – ¥123.75 and the Pound – £0.84.
According to analysts, the good news for the Euro in the long term is that the victory of Macron “removes the existential threat for the euro area” and the “markets can relax about European politics for at least a few weeks”. Some experts believe that for now, the focus will shift towards the question of whether the European Central Bank (ECB) will continue its stimulus programme as promised until the end of the year. This would become clear after the ECB’s meeting in June.
Other Currencies – Highlights
The Canadian Dollar has strengthened against the US Dollar and the Yen, reaching a four-week high against the Yen and a three-week high against the US Dollar. However, the Pound is resilient and is trading at 1.77 CAD; a bit higher than at the end of last week.
The New Zealand Dollar has regained ground against the US and Australian Dollar. The Kiwi emerged mainly against the Yen, reaching a five-week high at ¥78.19. Still, the Pound is trading at the same level as Friday last week – 1.87 NZD.
In contrast, the Australian Dollar dropped down after China announced its foreign exchange reserves increased for the third consecutive month. The news followed the fall of the Australian commodity prices against the Chinese, and indicate the gloomy future for the country’s top export market. The Pound continues trading at 1.74 AUD.