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European elections dominate market movements

21st April 2017 Market Update

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?? GBP – Sterling eased back yesterday from the highs seen on Wednesday, but managed to maintain a level close to the peak. Once again there was a lack of domestic data yesterday, but markets will remain sensitive to political risk in the coming weeks. Mark Carney’s speech last night contained no market moving commentary.

Today, UK Retail Sales are expected to be lower than the previous reading and this could harm Sterling. This figure has been unpredictable in the last few months and therefore, will be seized upon by traders once the result is published.

?? EUR – The Eurozone published very little data yesterday, but was able to gain ground against both the Pound and US dollar. The euro has been resilient ahead of the first round of the French election on Sunday, where far-right candidate Marine Le Pen is widely believed to progress through to the final stage.

Manufacturing and services sector data will be largely ignored today, as many analysts position themselves for volatility following the election result. As such, limit orders could be an effective tool to take advantage of any euro weakness.

?? USD – The Philadelphia Fed Manufacturing Survey disappointed on Thursday, falling far below both expectations and the previous month’s reading.
America will also publish its Manufacturing and Services PMI readings for April today and are anticipated to improve slightly. If this transpires, the US dollar is likely to gain ground through the afternoon and could finish the week strongly, particularly if there is no further mention of tensions with North Korea.

 

Key Announcements

?? GBP
09:30 – UK Retail Sales (expected to be lower than last month).

?? EUR
09:00 – Markit Manufacturing and Services PMI.

?? USD
14:45 – Markit Manufacturing and Services PMI.

 

Our View: Political risk remains at the forefront of rate movements ahead of the French election on Sunday and particularly following Theresa May’s surprise snap election announcement. The euro could come under pressure if Le Pen progresses and markets remain in approval of a UK General Election.
 
Sterling may struggle, however, to push on through current levels and the gains may be short lived once Brexit negotiations begin.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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