• Euro flying high
  • Breath again
  • Macron the favorite
  • Budget problems

The euro spiked to a five-month high overnight, and after backing down slightly it remains underpinned against the USD on the back of the French elections. Other European currencies were less cautious, and taking their cue from the developments in France as a positive for the Eurozone, made significant gains against the greenback. The Japanese yen was the worst performing currency this morning, sinking alongside gold as investors fled their safe haven assets in favor of higher risk ones.

Investors have the French electorate to thank for their sign of relief, exiting risk-off trades as their perception of geopolitical hazards eased. Emmanuel Macron cinched the top spot in France’s preliminary Presidential elections, ahead of far-right candidate Marine Le Pen. In what’s been an extremely close race, investors were worried about a showdown between Le Pen and her counterpart on the left – Jean-Luc Mélenchon. While both stand on opposite ends of the political spectrum, both candidates are known euro-skeptics, arguing for a complete overhaul of the current system and stronger borders.

The case for a Macron is a compelling one, and investors are already buying into it. Capturing the endorsements of the conservative François Fillon and Socialist Benoît Hamon on Sunday. Macron looks likely to win – especially after Mélenchon refrained from endorsing either of the two finalists. Fillon’s message to his constituents was simple: not the far-right. While Macron may be perceived as too ‘middle-of-the-road’ by those who want to see dramatic change, Le Pen may lean too far to the hard right to attract the votes she needs. Macron is expected to win the runoff by over 20 percentage points ahead of Le Pen.

The US may be poised for a government shutdown as it faces a battle for the Budget. While the US is no stranger to government shutdown, this would be the first time that a lack of consensus on the budget caused a closure during a President’s first 100 days in office. Despite a Republican majority in both houses of Congress, Trump faces significant headwinds in passing the US government’s spending plans. Trump tweeted this weekend that he intends to include funding for his proposed border wall, a pill that will be hard for democrats to swallow. Between fighting democrats and placating the more conservative elements in his own party, Trump faces significant hurdles. Democratic Senate leader Chuck Schumer warns that Trump’s involvement could be damaging to negotiations that are so far, so good by “mixing in and asking for things such as the wall in the budget.”

EURUSD: Euro up more than 1.25% against the USD after Macron took the lead in France’s presidential race.

GBPUSD: Sterling gave up overnight gains against the dollar to sit slightly lower.

AUDUSD: Aussie dollar slightly higher, following broader USD moves.

USDCAD: Canadian took back early morning losses, and though it still sits lower from a week ago it is flat on the day.

USDJPY: Yen took a nosedive after France’s elections spell ‘vive la risk!’ for investors who abandoned the safety of the Japanese yen.