Weekly Review April 24
The first round of the French Presidential election dominated market sentiment with notable relief as exit polls suggested that centrist Macron would win the first round and be a strong favourite for the second round. The Euro rallied strongly at the Asian open.
US jobless claims increased to 244,000 in the latest week from 234,000 previously. There were mixed production and housing data and the overall data impact was limited.
The New York Empire manufacturing index declined to 5.2 for April from 16.4 previously and the Philadelphia Fed index declined to 22.0 from 32.8 previously, although still at a high level.
President Trump stated that tax proposals would be unveiled in the week ahead and Treasury Secretary Mnuchin stated that plans would be passed by year-end.
The dollar index overall was undermined initially by gains in Sterling and dipped to below 100.00 with a further notional retreat at the Asian open on Monday.
UK Prime Minister May called a General Election for June 8th, three-years ahead of schedule, and the decision was ratified in parliament. Opinion polls suggest that the Conservative government would secure an increased majority in the vote.
Sterling had dipped weaker ahead of Prime Minister May’s statement given uncertainty over the content, although there was a sharp rally on hopes that a stronger government majority would boost the UK negotiating position. GBP/USD rallied to above the 1.2800 level with EUR/GBP sipping to below 0.8350.
The UK currency was unable to hold its best levels and the latest retail sales data was significantly weaker than expected with a 1.8% decline in volumes for March.
Bank of England MPC member Saunders was generally optimistic surrounding the outlook and suggested inflation would increase more than expected over the next few months.
EUR/GBP rallied sharply at Monday’s Asian open with a test of resistance near 0.8500.
The Euro-zone PMI data was stronger than expected with a composite reading at a six-year high of 56.7 for April from 56.4 the previous month.
Euro-zone CPI inflation was confirmed at 1.5% for March from 2.0% in February with the core rate at 0.7% from 0.9%.
ECB officials overall continued to indicate that it was too early to adjust monetary policy or forward guidance.
The Euro overall edged higher against the dollar, although with selling ahead of the 1.0800 area and consolidation near 1.0700 on Friday.
Exit polls from the first round of the French Presidential election suggested centrist Macron had won the vote with just below 24% of the vote and National Front leader Le Pen in second place with around 22%. There was relief that Macron headed the poll and that Le Pen did no better than suggested by polls which boosted expectations that Macron would win the second round.
The Euro rallied strongly with EUR/USD advancing to the 1.0900 level and the Euro index was over 1.0% higher.
There was a sharp decline in oil prices during the week with WTI dipping back below the $50.0 p/b level on over-supply concerns.
The Canadian consumer inflation data was weaker than expected and lower oil prices also undermined the Canadian currency.
The Australian dollar was hampered by a more dovish slant within the RBA minutes and a weaker tone in commodity prices. AUD/USD found support close to 0.7500 and rallied to 0.7580 as risk appetite improved after the French result.
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