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It was a win for Emmanuel Macron, plus some well-deserved redemption for political pollsters, as the market-preferred centrist candidate took the French Presidency decisively. However, despite defeating the staunchly anti-EU Marine Le Pen – who famously had threatened to remove France from the area’s single currency – by 65% to 35%, FX markets have been rather muted in their reaction to the result.
The Euro opened marginally higher against its Anglo-American counterparts, posting a 6-month high against the US dollar of $1.1025, although quickly came off the boil as the Macron victory failed to inspire the European currency to further gains. As a result, it is unlikely his election victory will carry influence throughout the rest of the week, which instead puts the impetus on a host of other FX drivers.
This week’s solitary central bank offering comes from the Bank of England, as the UK policy setting institution enjoys its quarterly ‘Super Thursday’, consisting of its latest monetary policy update, inflation report and press conference from Governor Mark Carney.
Investor focus for the meeting will unlikely be the headline interest rate itself, which is expected to stay at a record-low 0.25%, but instead on potential dissenting votes that come about in reaction to the inflation report. Last time around, Deputy Governor Kristin Forbes aligned herself against the other eight members of the MPC, however we could see other members joining her as inflation continues to hurtle towards the Bank’s 2% target. This will also thrust the spotlight upon the inflation report, especially given that this will be the first time policymakers have aired their thoughts on price level increases since the UK Government triggered Article 50 at the end of March. Expect Mark Carney to be grilled on the continuing impact of Brexit and what negotiations are likely to mean for UK inflation.
Sterling could be in danger of seeing its recovery rally stymied should inflation expectations have fallen from previous levels of over 2%. However, should it remain resurgent, and other members of the committee rally to Forbes’ cause, we could see the hawkish implications of this further the Pound’s rally against the Dollar to fresh 7-month highs.
Following on from UK’s latest inflation offering, we also see CPI releases from the world’s number one and number two economies. China sees the dual release of CPI and PPI in the early hours of Wednesday, likely to move sentiment for consumption assets such as metals, while the US releases its CPI figure on Friday afternoon alongside Retail Sales data.
The final driver this week comes from the wealth of policymaker speeches and meetings scheduled for the week. After last week’s seemingly hawkish Federal Reserve policy update, a particular emphasis will be put on the seven members of the US central bank scheduled to speak this week. Voting members that are included on the roster are Dallas centrist Kaplan, New York dove Dudley, Chicago dove Evans and Philadelphia hawk Harker.
In Europe, EU ambassadors meet on Wednesday to discuss the bloc’s Brexit negotiating position in greater detail, whilst simultaneously, ECB President Mario Draghi addresses the Dutch Parliament. Following his comments about Eurozone strength after the central bank’s April meeting despite the ongoing colossal stimulus remaining in place, can the ECB chief inspire fresh confidence in the Euro? Might he even have to deflect questions about a strained Eurozone relationship after the emergence of Angela Merkel’s annoyance at EU President Juncker’s leaked Brexit dinner saga?
Key data this week (Sign up here to get our daily live macro-calendar)
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UK Economic Announcements
08:30 Halifax House Price Index
Intl Economic Announcement
SUNDAY
French Presidential Election Second Round
MONDAY
03:00 Imports/Exports (CN)
09:30 Sentix Consumer Confidence (EZ)
UK Economic Announcements
00:01 BRC Sales
Intl Economic Announcements
07:00 Trade Balance, Industrial Production (DE)
15:00 IBD/TIPP Economic Optimism, Wholesale Inventories (US)
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Intl Economic Announcements
02:30 CPI, PPI (CN)
13:30 Import/Export Price Index (US)
15:30 Oil Inventories (US)
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UK Economic Announcements
00:01 RICS House Price Index
09:30 Industrial, Manufacturing & Construction Output
09:30 Trade Balance
12:00 Bank of England Super Thursday (Monetary Policy, Inflation Report)
Intl Economic Announcements
13:30 PPI (US)
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Intl Economic Announcements
07:00 CPI & GDP (DE)
13:30 CPI, Retail Sales (US)
15:00 University of Michigan Sentiment (US)
Technicals
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