Good morning,

Le Pen gets Le Spanked

As had been widely expected for a number of months now Emmanuel Macron, a centrist candidate who had only created his En Marche! party 13 months ago won the French election in a thumping victory over Marine Le Pen. Macron won by a margin of 2:1 gaining 66% of the vote against Le Pen’s 34% of votes cast. It is a heavy win; indeed the only person to have lost by a larger amount was Marine Le Pen’s father Jean-Marie in 2002.

The euro rally was brief and small with EURUSD popping above 1.10 for the first time since the election and GBPEUR in and around the 1.18 mark. Continued euro strength looks quite likely in our eyes. Fears over a wave of wins for populist parties have lessened given their defeats in both the Dutch and French elections and this weekend’s win for Angela Merkel in a German regional vote. Secondly, the data from the Eurozone this year has been steadily improving and there is a decent chance that European Central Bank now has a little more cover under which to operate should it feel the need to lessen the amount of stimulus that it is providing for the Eurozone economy.

Risks remain of course and as much as Macron’s win last night was emphatic, there is a non-negligible possibility that Macron’s reform agenda is hamstrung in the legislative elections by his lack of a party apparatus.

Macron a negative for the UK

Here in the UK we have to think that Macron’s win is a negative for the UK’s position within Brexit. Macron campaigned draped in the EU flag – something that is beyond the pale in UK politics – and will spend a lot of his political capital portraying France as an almost anti-Brexit state. He is unwilling to compromise on the European freedoms of trade and movement and will set out his stall to tempt British businesses into France to maintain single market access and free movement.

China trade improves

The Chinese yuan has remained steady through Asian trade as the latest export numbers showed a resilience of global demand that most had hoped for but few would have counted on. Exports rose 14.3% on the year, leaving the world’s second largest economy with a trade surplus of around $38bn. Tighter capital controls in the country have also allowed the country’s foreign currency reserves to climb back above the $3 trillion mark having dipped below in the past few months.

The data calendar is quiet today and most of the day will be spent focused on the euro and regional stock markets to see if the celebration of the Macron win continues.

Have a great day

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