Sterling
Sterling performed well over the Easter Weekend as events overseas diverted traders’ attentions from the ongoing Brexit saga. A Soviet-esque military parade on the streets of Pyongyang on Saturday, featuring a multitude of long-distance missiles, weakened risk sentiment, while jitters ahead of the French Presidential election weighed on the Euro.
It’s set to be a quiet week of domestic data, so US discussions with North Korea and the French vote look likely to remain key drivers of sentiment on the currency market.
Euro
The Pound to Euro exchange rate rallied by around a third of a cent over the weekend to strike its highest level since the end of February. The single currency suffered as analysts suggested the French Presidential election first round was too close to call.
Far-right, anti-EU candidate Marine Le Pen is currently projected to win the first round, with centrist Emmanuel Macron tipped to follow her into the second round, where Macron is seen likely as pipping Le Pen to the post. However, conservative Francois Fillon and leftist, anti-EU Jean-Luc Melenchon are not far behind. But, following the inaccuracies in the lead up to last year’s Brexit referendum and the US Presidential election, investors are well aware that any of the four candidates could potentially make it through to the second round.
The fact that two of the four candidates aim to take France out of the EU is of serious concern to Euro traders and the single currency is liable to remain under pressure while the possibility of an anti-EU French President remains.
US Dollar
Sterling strengthened by around a cent against the US Dollar over the weekend, settling above longstanding technical and psychological support, as geopolitical concerns weighed on Federal Reserve interest rate bets.
Last week US President Donald Trump told reporters that the US Dollar was ‘getting too strong’ and noted that an appreciating ‘Greenback’ could hamper US hopes of export growth. Trump also mentioned that he ‘likes a low interest rate policy’. The dovish remarks weighed on the US Dollar and the negative sentiment was compounded by fears of unrest in the Korean Peninsular.
Over the past week both the US and North Korean administrations have issued threats of military action. The stakes were raised by actions from both sides; US bombs dropped in Syria and Afghanistan were described as a sign of Trump’s resolve, while a parade of North Korean bombs in Pyongyang and a missile test were seen as a show of strength from the pariah state.
The North Korean situation is weighing on the US Dollar because geopolitical uncertainty could prevent the Federal Reserve from continuing its hiking cycle through fear of unsettling financial markets.
Canadian Dollar
The Pound to Canadian Dollar exchange rate rose by around a third of a cent to hit a fortnightly high over the weekend as global risk sentiment was dealt a blow by the ongoing aggressive communications between the US and North Korea. The commodity-sensitive ‘Loonie’ lost ground on Monday as oil prices cooled due to predictions that US shale producers will continue to ramp up output over the next few years.
Australian Dollar
Fears of a full-blown military conflict between the US and North Korea prompted a raft of flights to safety over the Easter Weekend. Because of the Australian Dollar’s reputation as a risk-sensitive currency, the safe-haven(ish) Pound was able to appreciate slightly against the ‘Aussie’ at the beginning of this week’s session.
New Zealand Dollar
GBP/NZD briefly touched a weekly low on Monday morning in reaction to a slightly better-than-anticipated Chinese Q1 GDP print. However, the mood of risk aversion among markets later drove Sterling higher versus the New Zealand Dollar.
Data Released
13:15 USD Industrial Production (MAR) Medium 0.5%
13:15 USD Manufacturing (SIC) Production (MAR) Medium 0.1%