EURUSD soared to a five-month high on the French election results as the two principal candidates (Macron and LePen) advance to the second round. The euro traded higher than expected, but with the betting line leading 90% for a Marcon win in the second run-off, the euro bulls were in command early.
Volumes soared on the EURUSD as both short hedges unwound and investors clamoured for top side exposure. Flow has been completely dominated by EUR and EUR crosses, but with the ECB later this week there may be some apprehension to chase this move higher,
Also, there could be a stutter step that may temper the EURUSD from moving much higher, given the looming second round of elections, and on its face, we could start to see greater risk premiums build.
With the European political risk fading to the background, at least until round two, the markets will quickly pivot to President Trump and tax reform after US President unexpectedly said on Friday at a Treasury Department event that there would be "a big announcement on Wednesday having to do with tax reform."
All in all, a very organised market this morning with liquidity stable from 5 AM Singapore onwards.
USDJPY
EURJPY which traded above 120.40 from 116.95 Friday has pulled USDJPY higher above 110.60, and we’ve seen real selling out of Tokyo, as the initial view that the move was a bit overdone with risk is still wobbly.
Outside of euro crosses, where volumes are still much higher, the market has been relatively tame.
