Euro Bulls Celebrate the First Round of France’s Election
Euro erupts after the results
Currency traders celebrated Emmanuel Macron’s victory by driving the euro more than 1% higher. The shared currency euro-US dollar (FXE) closed at 1.0728 on April 21 before the first round of France’s presidential election. The currency opened above 1.09 on April 24 after the election results were announced. The currency stabilized near 1.0920. When a country’s currency appreciates against its trading partners, it means that investors are confident in the country’s growth and economic prospects.
The euro rose from its lows near 1.0350 in early January. The economy is slowly getting back on its feet. The ECB is closer to achieving its monetary policy goal of 2% inflation. Investors would watch the second round of the election. Any sign of Marine Le Pen leading could exert pressure on the shared currency.
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Yen and US dollar lose out to the Euro
The global reserve currency, the US dollar (UUP), has been stuck in a narrow range for the last few weeks. It formed a temporary bottom near 98.30. Before France’s (EWQ) election, uncertainty should have pushed the dollar higher. However, President Trump’s comments about the dollar’s strength limited the gains. As a safe-haven asset, the Japanese yen (FXY) displayed a classic trait. It appreciated to a low of 108.11 before France’s election. However, traders were quick to unwind safe-haven trades. The market rallied on Monday after the election results. The Japanese yen depreciated to levels above its trading price of 111.00 against the US dollar. The rally will likely be short because uncertainty about the second round will start to cast its shadow on currency markets again.
Gold lost its shine
Gold (GLD) displayed the same trait as other safe-haven assets. Gold fell from $1,290 before the election results to a low of $1,266 on the first day of trading after the results. A sharp depreciation in gold will likely be challenged as we approach the second round of France’s presidential election. Geopolitical tensions involving North Korea are keeping markets volatile (VXX).
In the next part of the series, we’ll look at how fixed income markets performed after the first round of France’s presidential election.