Market focus on Retail Sales and French Elections

During a quiet days trading yesterday, the pound continued to consolidate and correct slightly from the significant gains seen earlier this week. With no data in the last couple of days traders have taken the opportunity to cash in their profits from the 4-5% gains seen for Sterling since last month, which have in turn provided the best buying levels against the Euro and US Dollar since last summer.

This morning the dice gets rolled again with the latest Retails Sales figures for the UK announced at 9:30am. These figures have been a real mixed bag in recent months, swinging from excellent to terrible one month to the next, and analysts are currently expecting another contraction in Retail Sales for the month of March, meaning these peak buying levels may not be around for much longer. This afternoon there is a string of US data including Manufacturing and Services PMI figures at 2:45pm before Home Sales data at 3pm.

French Elections Overview
The key focus currently for anyone buying Euros in particular, is the French elections that start this weekend. As with any elections these have the potential for big swings in Euro exchange rates and the markets will be acting as early as Sunday night to react to the results of the first round of voting. The process for this election is simple, all candidates are voted for on Sunday and the top 2 go into a final round re-vote on 7th May. The front running 5 candidates are Marine Le Pen (far right), Francois Fillon, Emmanual Macron, Jean-Luc Melenchon (far left) and Benoit Hamon. The current favourites in the polls are Macron and Le Pen but these 5 candidates have only a few % of votes between them leaving it wide open for Sunday’s first round.

From a currency perspective the 2 candidates that could weaken the Euro and push rates higher are Le Pen and Melenchon given that both intend for France to leave the EU and the UN. The favourite Macron is likely the most Euro positive candidate and is expected to get through the first round along with one other. Some are speculating that if Le Pen or Melenchon also get though that GBP/EUR rates could up with the concern of their potential victory 2 weeks later, however 2nd round polls suggest an easy victory for Macron in this scenario which would more likely see a stronger Euro as traders begin to place their money on his victory instead. On the balance of things it certainly seems this weekend poses more threat than opportunity for GBP/EUR buyers, particularly given the peak rates we are currently seeing.

To discuss this in more detail contact your broker today on 0800 043 2623.