• Frexit
  • Political risk takes Europe by storm
  • JPWhy not?
  • Out is out

The EU saw another strong data print this morning as German factory orders rose the most since 2014, but this failed to inject new life into the euro as election risk moves to the forefront. Far-right French presidential hopeful Marie Le Pen published her political manifesto yesterday, outlining 144 “commitments” of her policy platform that include abandoning the euro and possibly leaving the EU altogether. The likelihood of Le Pen’s success seemed remote a few weeks ago, that is until frontrunner François Fillion’s campaign was rocked by scandal, moving him squarely to the back of the pack in polls. While Le Pen still lags behind her pro-European opponent Emmanuel Macron in most polls, the upsets of Brexit and the American elections have shaken investor’s confidence in polls.

The rise of global populism is one of the key themes of 2017, and with European politics in focus political risk may well continue to weigh on the euro.

Political risk in Europe is fueling a stronger yen, pushing USDJPY to 112 early this morning. The yen could extend these gains through the rest of the week if investors continue to focus on risk-off trades to favor JPY. President Trump will meet with Japanese Prime Minister Shinzo Abe on Friday, Abe is expected to focus on Japan’s investment in the US. Trump has been a critical of Japan since the election.

Theresa May continues to toe the line as her Brexit plan moves through parliament. A spokeswoman for the prime minister told Reuters that out means out: “We are not going to allow there to be attempts to remain inside the EU or rejoin it through the back door.”

EURUSD: The euro is weaker as the rise of populism clouds fears for the upcoming French elections.

GBPUSD: Sterling is being dragged lower on Brexit chats and broader USD strength.

AUDUSD: Retails sales in Australia disappointed, driving the Aussie dollar down half a percent against the USD.

USDCAD: USD strength pushing USD/CAD up more than a cent after a static overnight session.