As foreseen by the polls, centrist candidate Emmanuel Macron won the French elections with a convincing edge of 65% of the votes, against the 35% given to Le Pen. The turnout was 65.3% according to the Ministry of Internal Affairs of the country.
Macron, who is championing France’s membership in the EU and towards strengthening the economic and political ties with the bloc, was the preferred candidate for the financial markets. Most likely due to his specific and predictable political position, which contained less drastic changes.
The European currency reacted with a gap above 1.10 but later went into a decline, having found the intraday bottom at the level of 1.0940. The German DAX index also jumped to the level of 12.756.00, but gave up on the rally attempt, dropping to a 12.663.75 level. The elimination of the political risks and favourable outcomes for the financial markets will likely allow the European assets, including the Euro, to go on the offensive. Pricing in the probability of an ECB’s shift towards a hawkish stance at the next meeting. Buying the Euro from the level of 1.0950 seems appropriate with the immediate goal at the level of 1.11.
Growth in the UK retail sales slowed to 0.5% in April from 1% in March, according to a report from Visa. The tendency for a further decline is due to a sharp increase in the inflation spurred by the devaluation of the Pound and lagging growth of the wages. Since January 2017, the key consumer inflation index (CPI) has grown from 1.2% to 2.3%, while wages have fallen from 2.8% to 2.3%. Given that the consumer spending accounts for the 65% of the country’s GDP is in a further decline in consumption promises weakening the data of the probable economic growth. The Bank of England’s Carney team has to make a difficult choice on Thursday – either to keep the key rate low, pushing the inflation further or moving towards a tightening, reducing the demand for money.
On Thursday the Bank of England will announce a decision on the interest rates and the program of assets purchases. At the last meeting, one out of the nine participants called for a rate increase. Raising the possibility that at the next meeting the officials could turn to hawkish policy.
The latest data in the Chinese economy showed that the country’s trade balance surplus increased in April to $ 38.05 billion, contrary to the expected $ 35.20 billion. The exports growth was possible due to the overall improvement in the global economic environment, as it helped to ease the concerns of a probable decline in the Chinese production capacity and the stagnation in the consumption of the industrial sector. After the 9.15 billion Dollar deficit in March thanks to the Chinese Holidays, the trade balance in April and May has shown steady growth surpassing the expectations. Despite the comparatively good data, the exodus of the Chinese stock market continues, as the blue chip index ShComp has lost more than 6% in a month. Fueled by the cheap credits of the Chinese economy in the period of 2015-2016 and the unsustainable banking sector frightens investors, despite the government’s efforts to cool the economy. Since December 2015, the growth of money supply has fallen from 13.7% to 10.6% in April 2017.