The Euro has surged against the Pound after yesterday’s first round of French elections increased the chances that Emmanuel Macron might be France’s next president. With Marine Le Pen taking 6.9 million voters, France is clearly divided, but the Euro is safe for now. Sterling is still trading strong against the Dollar today, with a rate around $1.2805.

The US Dollar to Euro exchange rate is at a 5-month low after the first round of the French elections. The Dollar is expected to recover during the week on the strength of a series of data releases that are kicked off by a consumer confidence report tomorrow.

Pound Sterling – UK Markets

The victory of Emmanuel Macron on the first round of the French Presidential elections gave a boost to the Euro. This morning the markets opened with the Pound to Euro at €1.17. This is a heavy fall for the Pound, especially after the surge it received a week earlier with Theresa May’s announcement of the snap elections. On Tuesday 18 April, the markets opened at €1.18 and closed at €1.19.

However, this morning the Pound rate has improved compared to the fall the currency had on Friday after the Office for National Statistics (ONS) reported that retail sales fell by 1.8% for March 2017. Nevertheless, according to analysts, currency movements in the next two weeks will be determined by political events. The Pound has become a political currency driven by Brexit and more recently influenced by Theresa May’s call for an 8 June election. Going forward, due to the elections in France, the Pound against the Euro will definitely be affected, as it was seen this Sunday with the French vote.

The Pound has risen over 2% against the Dollar in the last 24 hours, opening this morning at $1.27. The experts are foreseeing a new phase of the relation GBP/USD due to the upcoming general election in the UK. Last week the Pound showed an upside potential and the new estimate target is $1.31.

The CBI industrial trends survey will be released later today. The survey is an indicator of trends for the UK manufacturing industry and the wider economy, including information on optimism, domestic and export orders, capacity, output, employment, investment and competitiveness.

US Dollar – US Markets

The US Dollar is also feeling the effect of the French elections, falling to its lowest point against the Euro in the last 5 months. However, it is possible that the Euro might not hold those gains for long. Historically, the last time the Euro increased its value so much against the US Dollar was on 18 March 2009.

It is expected that the Dollar will regain some of its losses tomorrow after the announcement of US CB Consumer Confidence for April. Economists are optimistic after last month’s results which showed the highest level of consumer confidence in the US since December 2016, reaching up to 125.6, much higher than predicted, 113.9.

Euro – European Markets

The Euro jumped to a 5-month high against the US Dollar at $1.09, before losing a bit of ground, stabilising at $1.084. The Euro strengthened after the announcement of the results of the first round of the French presidential elections. The independent centrist Emmanuel Macron topped the first round of the election with 23.75% of votes, leaving Marine Le Pen second with 21.53%.

Macron, an ex-minister of economics and a former advisor to the current French president Francois Hollande, will clash with the leader of the ultra-right wing Front National party in the second round on 7 May. Sunday’s first round was marked by the failure of the candidates of the established left and right political parties to be in the run off.

Francois Fillon, a Conservative candidate, who was stricken by many scandals, during his election campaign, conceded defeat and urged his supporters to back Macron in the second round. Benoit Hamon, the mainstream left presidential nominee of the ruling Socialist party got 6.35% of votes, less than the derisory 8% that was expected. The Republicans and the Socialists have been knocked out of the race. Macron, according to analysts, is expected to get votes from their supporters and win the second round of the election.

The German IFO data were announced today. The German business sentiment index is an early indicator of current conditions and business expectations. According to data, the IFO Business Climate Index improved to 112.9 in April from the revised level of 112.4 in March. This is the highest level since August 2011, managing to positively surprise the investors. After the announcement, DAX surged by 2.52%.

Other Currencies – Highlights

The Sterling to Australian Dollar exchange rate had rallied, in the previous week, following the news of June’s upcoming UK election. Analysts think that the Sterling to Australian Dollar rate, which is currently at AUD 1.69, has reached a level that will cap future progress higher.

The Sterling to Kiwi exchange rate is at 1.82, looking bullish at the start of the week. Attention should be given to the announcement of data on New Zealand’s trade balance, on Thursday. A possible deficit shrinking may lead to a new rally.