Euro Surges on Bets of Macron Presidency, Pound Struggles Under Weak Business Sentiment

Pound Sterling
Disappointing CBI business surveys and housing market data left the Pound on a downtrend on Monday. Markets were not impressed to find that the business optimism index had plunged from 15 to 1 for the second quarter, suggesting that the economy remains under increasing pressure. With the UK economy showing signs of slowing growth the mood towards Sterling deteriorated, leaving it to trend lower across the board. If tomorrow’s public sector net borrowing figure proves similarly discouraging then the Pound is likely to fall further out of favour.

Euro
As pollsters correctly predicted the results of the first round of the French presidential election the single currency saw a sharp boost. Although National Front leader Marine Le Pen progressed to the final run-off the odds do not see a victory for the far-right candidate as particularly likely. Centrist Emmanuel Macron remains the favourite to triumph in the final vote, which should ease fears over the future of the currency union thanks to his pro-EU stance. While the initial relief rally is expected to fade overnight the Euro could maintain a bullish trend in the near term.

US Dollar
With market risk appetite on the rise the safe-haven US Dollar fell back at the start of the week. As the odds of the Federal Reserve raising interest rates in June were seen to decline confidence in the strength of the US economy has also weakened. Both the Chicago and Dallas Fed manufacturing activity surveys proved disappointing, meanwhile, pointing towards a softening sector. Domestic political worries have also been on the rise, with fresh disagreement brewing over Donald Trump’s promised wall.

Australian Dollar
The general increase in appetite for higher-yielding assets helped to boost the ‘Aussie’, even in the absence of fresh domestic data. With global geopolitical tensions temporarily easing investors were encouraged to pile back into the Australian Dollar, particularly as base metal prices also rallied. Further support could be in store for the antipodean currency if Wednesday’s consumer price index data shows an increase in inflationary pressure.

New Zealand Dollar
Ahead of ANZAC Day the New Zealand Dollar struggled to find any particular traction against its rivals. Although the ‘Kiwi’ benefitted from the wider market mood of risk appetite markets appeared to favour the Australian Dollar over its antipodean cousin. Weaker New Zealand credit card spending figures could increase the downside bias of the ‘Kiwi’, although Thursday’s raft of trade data may offer a rallying point.

Canadian Dollar
With confidence in OPEC’s ability to reduce the global oil supply glut wavering the ‘Loonie’ came under renewed pressure at the start of the week. As Brent crude continued to trend below the US$52 per barrel mark there was little particular reason for investors to favour the commodity-correlated Canadian Dollar. After Friday’s disappointing inflation data the mood towards CAD exchange rates remained muted, even as general market risk appetite picked up.