Currency Note

Will the awful events in Paris affect election?

By Paul Redmond April 21st, 2017

Paris attack

After Geert Wilders’ campaign failed in the Dutch general election, many people felt it heralded the end of the recent rise in populism. However, if the latest polling figures in the French election are to be believed, more than 40% of voters will turn out to support either Francois Fillon or Marine Le Pen, the two anti-establishment, anti-EU leaders and, after last night’s terrible events in Paris, we might find that their support has grown further.

What this support for leaders who champion nationalist policies will do to the currency markets remains to be seen, but the volatility in the euro suggests traders were already anxious about the French elections before the deaths last night.

GBP: pound recovery continues but there’s still a way to go

Sterling continued to be strong yesterday, and began the day higher than it was prior to the snap election news. However, it’s worth noting that despite Theresa May’s assertions that the British economy remains solid, the UK currency still has a lot of ground to gain before recovering from the slump after the EU referendum.

Markets seem convinced that the general election will result in a bigger Tory majority and potential for a resulting softer Brexit. With the election a mere seven weeks away, the daily campaigning by all parties could see the pound becoming volatile as markets react to the news as it comes in.

Today we have the release of UK Retails Sales figures for March. Expectations are for growth to be negative month on month but only slightly down year on year and still showing robust growth greater than 3%.

EUR: latest polls had put Fillon in with a chance – has this now all changed after last night?

The euro began yesterday morning by hitting its highest level since the end of March against the US dollar, gaining 0.3% after an opinion poll suggested Emmanuel Macron will win the forthcoming French election. This was before the terrible events in Paris last night which saw those gains given back.

However, perhaps the biggest surprise in the run-up to the election is the suggestion that Francois Fillon is in with a renewed chance of victory. Following the “Penelope Affair”, it was generally felt he was out of the race but a recent surge in the polls means he could still get through to the second round this Sunday. If that proves true – and it is at the expense of Marine Le Pen – then the restoration of faith in centrist politics could trigger a boost to the euro.

With the deaths in the centre of Paris yesterday evening we may find that the anti-establishment parties benefit as the voters could want France to have greater control of its borders.

USD: continuing claims figure at lowest level since 2000

The US dollar index was down 0.2% yesterday, as the latest economic data from the US did little to change recent views that the economy is only growing modestly, despite optimism over Trump’s pro-growth agenda.

Newly released unemployment figures showed that the labour market remains strong. The continuing claims figure – which is seen as a good measure of unemployment – was at its lowest level for 17 years.

Meanwhile, in Washington, world finance ministers and top central bankers met to talk about the global economy. The discussions are expected to focus on Trump’s government as well as its protectionist trade policies and how they will impact the global economy.

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