Sterling
Billed as one of the most decisive days on the economic calendar in 2017, yesterday turned out to be one of the dullest days to date. After the shocks of Brexit and Trump, which sent uncertainty rippling through financial markets in 2016, anxious traders breathed a sigh of relief yesterday that anti-EU Marine Le Pen was not voted leader of the nation with the Eurozone’s second-largest economy. However, the relief didn’t last long and any rallies in European stocks or currencies petered out rather rapidly. This left Sterling to trade on a steady path against most of its major currency rivals.
Euro
The Pound to Euro exchange rate ticked higher by around a third of a cent yesterday as the single currency’s initial French election-related gains dried up sharpish.
At 39, Centrist Emmanuel Macron became the youngest French leader since Napoleon. The pro-EU candidate with no established political party received over 20 million votes to easily beat far-right Marine Le Pen, who received around 10 million votes. Interestingly, around 15 million people spoiled their ballot papers or abstained from voting, suggesting that Macron may have benefitted heavily from an ‘anyone but Le Pen’ mentality.
It remains to be seen how difficult it will be for the new President to enact his proposed economic reforms. Plans to bring the unemployment rate down from 10% to 7%, cut the national deficit by €60 billion and bring flexibility to the labour market rely on Macron’s En Marche! party gaining enough support in June’s General Assembly election. And it seems that markets are reluctant to bet heavily on a successful Macron Presidency, even though they are mightily glad that Le Pen and her anti-EU platform did not come out on top.
US Dollar
‘Cable’ changed hands close to its highest level since September 2016 for most of yesterday’s session, although Sterling was unable to breach resistance at the next key psychological barrier.
With little significant economic releases, in the US or the UK, between now and Thursday lunchtime, GBP/USD could find itself treading water over the next few days. Technical analysts suggest that the Pound has the edge over the US Dollar at this moment in time, but that could all change if the Bank of England’s policy statement on Thursday is marked by dovish rhetoric. On the other hand, an optimistic message with comments on future rate rises would likely drive Sterling higher against the ‘Greenback’.
Canadian Dollar
Oil prices rose yesterday afternoon after OPEC hinted that it was considering extending its production cut by another six months to help erode oversupply in the market and prop-up prices. This gave the commodity-sensitive ‘Loonie’ a little bit of a boost, but overall GBP/CAD remained fairly steady, at levels not seen since the Brexit vote last June. The Canadian Dollar is suffering from fears that US President Donald Trump’s protectionist rhetoric could lead to disadvantageous trade policies for the Canadian economy.
Australian Dollar
The Pound to Australian Dollar exchange rate inched higher by around a third of a cent yesterday to touch a new eight-month high. Risk sentiment is looking quite soft at the moment, with many traders anxious of any potential moves from Donald Trump to hamper global trade. The likelihood of another dose of monetary tightening next month from the Federal Reserve is also dragging on demand for the risk-sensitive ‘Aussie’.
New Zealand Dollar
The Pound jumped half a cent against the New Zealand Dollar at the start of this week’s session, however, Sterling stuttered later on in the day and GBP/NZD dropped back to its lowest level since last Tuesday.
Data Released
15:00 USD Wholesale Inventories (MAR F) Medium -0.1%