Euro on the back foot ahead of Sunday's French election: April 24, 2017

Market Review - 22/04/2017   03:51GMT  

Euro on the back foot ahead of Sunday's French election

The single currency dropped across the board on Friday as investors remained cautious ahead of the first round of France's Presidential election on Sunday. French people have until 18:00GMT to cast their votes but market expects a relatively low turn out which makes predictions on the election outcome even more difficult. 

Earlier in the day, euro traded sideways in Asia and briefly edged up intra-day high of 1.0738 but the pair soon reversed its short-term rise and fell to 1.0688 in Europe after tripping stops stops below 1.0700. The single currency remained under pressure in New York morning and hit session lows of 1.0683 but later staged a modest rebound at the close due to short-covering as well as position adjustments.  

Versus the Japanese yen, the greenback remained under pressure and weakened to 109.18 in Asia. Dollar met renewed selling at 109.39 at European open and dropped to 108.99 at New York open on cross-buying of yen. The pair later hit session lows of 108.89 in New York afternoon.  

The British pound remained under pressure in Asia before staging a brief but sharp rebound to 1.2835 in European morning. However, cable tumbled after the release of much weaker-than-expected U.K. retail sales and weakened to session lows of 1.2757 at New York open before stabilising. Cable later rebounded in tandem with euro to 1.2812 at the close, making a highest weekly close in 6 months which is technically bullish for the pound. 

In earlier news, U.K. Office for National Statistics said that retail sales slumped 1.8% in March from the prior month, compared to the previous 1.7% advance which was revised from a previous gain of 1.4%. Analysts had expected March's reading to drop by only 0.2%. Year-on-year, retail sales increased 1.7% last month, compared to forecasts for growth of 3.4% and February’s 3.7% advance. 

In other news, ECB said 'growth in the euro area economy, supported by the ECB's monetary policy measures, is firming n broadening; a very substantial degree of monetary accommodation is still needed; there are also signs of somewhat brighter global recovery n increasing global trade; the risks of deflation, defined as genaralised price declines that trigger a negative spiral of self-fulfiling expectations, have largely disappeared; underlying indlation has not shown a convincing upward trend; in the coming months, headline inflation is likely to fluctuate around current lvls; cannot yet have sufficient confidence that a sustained adjustment in inflation will materialise in a durable manner.' 

On the data front, market research group Markit said that its flash services purchasing managers' index (PMI) in U.S. fell to 52.5 in April, from the prior month’s reading of 52.8. 

Data to be released this week: 

Germany Ifo business climate, current assessment, expectations, UK house price, CBI trends, Canada wholesale sales and U.S. National activity index on Monday. 

New Zealand market holiday, Australia market holiday, Japan all industry index, France business climate, UK PSNB, PSNCR, U.S. redbook, home price, new home sales and Richmond Fed manufacturing survey on Tuesday.

Australia CPI, France consumer confidence, U.S. mortgage applications, building permits and Canada retail sales on Wednesday.

Australia export price index, import price index, Japan BoJ rate decision, Germany consumer confidence, CPI, HICP, UK house price, CBI trades, Italy business confidence, consumer confidence, trade balance, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, ECB rate decision, U.S. jobless claims, durable goods, trade balance, wholesale inventories and pending home sales on Thursday.

New Zealand trade balance, Japan Tokyo CPI, National CPI, unemployment rate, industrial production, household spending, housing starts, construction orders, Australia PPI, France GDP, PPI, Germany retail sales, UK BBA mortgage approvals, GDP, Italy CPI, PPI, EU CPI, Canada GDP, U.S. PCE, GDP and consumer sentiment on Friday.