Tres bon Macron! As we woke up this morning the world cried “Holy Macron-i!” as Emmanuel Macon’s victory took more than 66% of the vote in France’s Presidential election and has halted the now officially Sub-Marine-d Le Pen and the marche of radical populism, at least for now. The Euro strengthened then dropped off after early profit taking in the Asia market this morning and confidence in polling has returned for some. It is important to remember that despite winning by the second-largest margin since 1965, one in three voters preferred Le Pen's anti-European, anti-immigrant nationalism so Macron still has his work cut out for him. Of course, in France as I type this the trade unions and activists are already protesting. A record 11.5 percent of votes cast were either blank or spoiled, while a near-record total of 25.38 percent of the registered voters abstained the official figures showed, all of which gives the gallic shrug a slightly more pointed meaning.
The results of the election in France have relieved much of the tension in Europe on the political integrity of the EU, if not the financial, at least until the election in Germany in September. Despite the Macron-economic effect overall GBP has been steadily gaining ground over the Euro and they sit at 1.184 as I write this. Don’t forget that in mid-March the market bottomed out at below 1.14. If you are considering buying Euro from GBP now may be an appropriate time to trade at spot or fix a forward contract to take advantage of the rate before the UK election and then the real effects of the Brexit negotiations hit home. Please do not hesitate to contact one of the team here at ACM to discuss your needs.
The following graph depicts last week’s GBP/EUR moves:
GBP/EUR 1 Week
The US had two large pieces of news with Non Farm Payrolls strong at +211k and with the unemployment rate falling unexpectedly to 4.4%, it is good news for the Trump administration. There will be another set of jobs reports in June before the next probable Fed move on interest rates of c.0.25%. Tax reform is going to take longer than anticipated to work through and that will generate uncertainty. There is also something to be said for no matter how good or bad you think the NHS is, its very existence must be preferable to staring down the barrel of Trumpcare for the millions of Americans that it is unlikely to permit cover over.
In the UK an element of Prime Minister May’s mantra rubbed off on GBP which remained “strong and stable” for much of the week and sits comfortably around 1.296 mark today, following a steady climb. Do not ever take anything for granted, despite the election being believed to be “in the bag” for the Conservatives come June. This is a view supported by the shifting sands of recent local elections. GBP may not continue to enjoy the relative strength it holds today. The future for the UK is fraught with Brexit brinksmanship and some hard negotiations ahead. Linked with weakening fundamentals and GDP growth slowing down all of this is likely to result in a drop of GBP value. Buyer beware! Please consider defining your trading triggers and please contact us to discuss a market order so that we can help you achieve your aim.
The UK will reach another interest rate decision point on “Super Thursday” this week. Dubbed “Super” as the Bank of England will also publish its quarterly inflation report. Usually this is an opportunity to lay out new monetary policy announcements but now with weaker growth and slowing wages, the BOE may be more cautious. Inflationary pressures have been alleviated but Mark Carney and his colleagues might also be more cautious on communications as the event is held exactly four weeks ahead of the general elections in the UK.
The following graph depicts last week’s GBP/USD moves:
GBP/USD 1 Week
Just coming off its highest point in 5 months (now at c.1.098) the EUR/USD rate briefly broke through 1.10 over the weekend. Now that the Euro hedged positions have been closed post French election, and with business confidence improving beyond just Germany from today, there is likely to be some period of stability for the Euro, less a black swan event. USD on the other hand is not yet anywhere near steady ground or even shallow waters. This week Friday is likely to bring the seismic shock, if any is to come, as US CPI and advance retail sales are published, along with the German GDP announcement.
The following graph depicts last week’s EUR/USD moves:
EUR/USD 1 Week
It only remains for us to wish you well for the coming week and to remind you that no one has a crystal ball. Anyone that tells you they can predict the future with any degree of certainty is lying. However, some can offer you educated opinion and attempt to provide some thoughtful, common sense guidance. Not trading your currency requirements is as much of a risk and a gamble as trading. The markets will move, volatility will vary but whatever your foreign currency exchange and international payment requirements are, you can rely on the team here at Aston Currency.
Written by Damien Lipman