Analysts at BBH points out that there is growing confidence that Le Pen will not be the next president of France following the televised debate for which two polls showed Macron doing best.
“This has lifted the euro and reduced the French interest rate premium over Germany. The euro pushed through $1.0800 after initially dipping below yesterday's lows.”
“The outside day (engulfing pattern) would be strengthened with a close above yesterday's high, a little above $1.0775. The next target is the February 2 high near $1.0830. It reached almost $1.0875 following the ECB's decision in December to extend QE longer than had been anticipated but at a reduced pace of 60 bln a month (down from 80 bln).”
“The US two-year premium over Germany peaked nearly two weeks ago near 223 basis points. Today it is near 205 basis points, the lower end of where it has been over the past month. The US 10-year premium peak shortly after last Christmas near 235 basis points. Today it is just around 202 basis points. Over the past four months, it has only closed below 200 basis points once.”
“While the euro is outpacing the other major currencies, it is dragging up other currencies against the dollar, including sterling, the Swiss franc, and the Scandies. Core bond yields are 2-3 basis points firm, but peripheral yields are a bit softer. European stocks are heavy, and the Dow Jones Stoxx 600 is threatening to snap a three-day advance.”