The euro has edged higher in the Tuesday session, as the pair trades at the 1.09 line. On the release front, it’s another quiet day in the Eurozone, with no major events. In the US, we’ll get a look at two key events. CB Consumer Confidence is expected to improve to 123.7, while New Home Sales is forecast to edge lower to 590 thousand.
The markets breathed a collective sigh of relief late Sunday, as opinion polls accurately forecast the outcome of the French presidential election. The field of 11 candidates in the first round was pared to just 2 candidates. The winners? Centrist Emmanuel Macron and far-right Marie Le Pen. Macron garnered 24% of the vote and Le Pen 22%. The runoff vote takes place on May 7 and French voters couldn’t have a clearer choice as they head back to the polls on Sunday. Macron served as a minister under President Francois Hollande. He favors deregulation and is a staunch support of the European Union. Le Pen, who heads the National Front, has campaigned on a ‘France first’ platform, vowing to curb immigration and take France out of the eurozone. Hollande and Francois Fillon, who ran in the first round, have thrown their support behind Macron and asked voters to reject ‘extremism’. Macron is a heavy favorite to win the second round and become president, with polls giving him a comfortable lead of above 60%.Since opinion polls were accurate ahead of the first round of voting, the markets appear to relying on the current polls as well, meaning that a Macron victory has been priced in. Unless this sentiment drastically changes during the week, the election will be a non-event for the market. At the same time, nothing is a sure thing in politics, as underscored by the Brexit vote and the election of Donald Trump, two events which stunned the markets and triggered strong market movement.
Donald Trump has plenty on his plate, but he will have to put in some overtime this week to avoid a shutdown of the federal government on Saturday. Congress must pass a spending bill which will fund the government until October, but the bill requires the backing of 60 senators. This means that the Republicans (who control 52 seats) will need the support of 8 Democrats. This has led to bipartisan negotiations, and it’s reasonable to expect that these talks could go down to the wire, as both sides try to stick to their positions and try not to blink first. The last shutdown was in 2013, lasting 17 days. Another shutdown would be embarrassing for Trump, as it would start on his 100th day in office and would cast doubts on his ability to push his budget and tax plan through Congress.
