French Election 'Too close to call'

Expectation for Le Pen and Macron to advance.

In an election that is too close to call, according to opinion polls, it is surprising that there is so much certainty that Marine le Pen and Emmanuel Macron will receive the most votes on Sunday and advance to the run-off on May 7th.

Fillon is just 2% behind with Melenchon a further 1% back. These are well within the margin for error so any voter apathy on Sunday could lead to a surprise.

Following last night's terrorist attack in Paris, it would appear to be Macron who is the more likely candidate to suffer. Le Pen’s call for reinstatement of border control as part of her anti-E.U. stance would appear likely to “strike a chord” with voters. The Euro isn’t reacting too much with traders perhaps keeping their powder dry for Sunday/Monday. The single currency is clinging to the 1.0700 level although any rally towards 1.0800 has been met, as it has for some time, with aggressive selling.

In the U.K. opinion polls give the ruling Conservative Party a resounding 24% lead over the Labour party. This would translate into a 100+ seat majority.

A note of caution, these were the same pollsters that predicted a comfortable remain vote last June. Voter apathy could play a major part in this election. We have council elections on May 4th (cue Star Wars music) which traditionally have a turnout of less than 40%. The conservatives biggest threat would be that the result appears a foregone conclusion and voters simply don’t bother.

Today sees the release of retail sales data in the U.K. The Bank of England will be monitoring the cations of the consumer since that has been the mainstay of the economy for some time. Year on year, retail sales are likely to have declined slightly, from growth of 3.7% in February to nearer 3% in March.

Also, released to today are activity reports for both in services and manufacturing in the Eurozone and U.S.

In Europe activity should remain strong following last month's 56 read for services and a 56.3 number for manufacturing.

The U.S. data has been a little weaker with a 53.3 and 52.8 reads for manufacturing and services respectively.  A fall below 50 means contraction on the economy but that is unlikely to be seen given the path of interest rates in the U.S.

Next week is a relatively light week for data.

The Bank of Japan and ECB both make interest rate decision. No change to core rates is expected but the ECB may rein in its asset purchase a little more.

The French election result, particularly if there is a result other than the predicted Le Pen and Macron victories, will lead to some volatility as will any surprises in the U.K. campaign. Having said that traders will be becoming bored with an election that is a) still more than six weeks away and b) (for them), a foregone conclusion.

North Korea promised “a launch a week”, so it remains to be seen if they are capable and/or willing to tug the tiger's tail again.

The second quarter is considered by traders as the “money making quarter”. So far volatility has been a little low and any activity has been short lived. Trends, particularly anything more than short term have been difficult to read.Traders will be looking to an increase in volatility from geopolitical events to provide the movement needed to make money.