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As largely expected Emmanuel Macron has won the French Presidential election beating Marine Le Pen. This is a vote of confidence in the European Union which have become so under threat in recent years. This was largely already priced in the market, explaining the muted market reaction. Macron could now help to strengthen European resolve to tackle critical issues including Brexit, and could give the EUR a boost as the chances of ‘Frexit’ have gone and given investors a boost in confidence in the single currency.
Mario Draghi is speaking on Wednesday and we have Industrial and Manufacturing data on Friday. Mario Draghi is President of the European Central Bank and investors will be watching his speech for any clues as to future economic plans.
This week begins quietly for UK news as markets digest the results from the as Macron victory in the French election. The Euro has been steady against the Pound in the aftermath but the impact from this could be more long term as we learn more of Macron and his pro-EU stance, and how that impacts Brexit negotiations. His tough stance on Brexit could prove hard on the Pound. Thursday is without doubt the big day for the Pound this week with the ‘Super Thursday’ release of the Bank of England Interest Rate decision and Quarterly Inflation Report.
Markets will be gauging the accompanying commentary to these releases for clues on future policy from the Bank of England. Overall it seems the very worst for the Pound is now over although Sterling could easily drift lower if growth forecasts are lowered on Thursday. Buying 100,000 EUR would be around 6,000 GBP cheaper today than it would have been in October last year.
|GBP/EUR||Oct 2016 cost||May 5th 2017 cost|
|Buying 100,000 EUR||90,331 GBP||84,473 GBP|
The US Dollar is a little weaker on the relief of a Macron victory. The Euro has strengthened and this has seen investors moving funds out of the US Dollar into the Euro. Even a very strong employment report on Friday wasn’t enough to stimulate interest back in the US Dollar.
Despite Unemployment dropping to a 10-year low of 4.4% and lots of new jobs being created average hourly earnings growth dropped to 2.5%. What this means is that more Americans are employed but they are earning less. With various Donald Trump pledges and plans hitting brick walls this was of yet further concern for investors in the US Dollar.
A hike is still likely in June but there are now several much more pressing questions over the Trump administration’s ability to push through the reforms they wished. Much of the hype surrounding the US Dollar has been based on its and the US economy’s future performance. With this now being called into question markets are sceptical about how this will pan out further down the line for President Trump and his team. USD is the weakest it has been all year. 200,000 Dollars now would be around 12,000 GBP today than at the start of the year.
|GBP/USD||Jan 2017 cost||May 5th 2017 cost|
|Buying 200,000 USD||166,028 GBP||154,261 GBP|
News this week
Tuesday : AUD budget release
Wednesday: ECB president Mario Draghi speech
New Zealand interest rate decision/Monetary policy statements
Thursday: Bank of England interest rate decision
BoE Monetary policy summary
Friday: Germany gross domestic product
USD consumer price index
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