• Macron pushes for unity
  • Buy the rumor…
  • US jobless rate falls to pre-crisis low
  • Fed speaks this week

Investors breathe a sigh of relief after a decisive win from Emmanuel Macron in France’s presidential election. Upsets in the Brexit vote and US elections had rained skepticism on the reliability of polling, but pollsters can finally give themselves a pat on the back. Estimates for Macron to win by at least twenty percentage points realized a larger lead, with Macron capturing 66% of the vote and Le Pen coming in just under 34%. Recognizing that Le Pen attracted more than ten million votes, Macron pledged to heal the divisions that the election exposed. Recognizing the “anger, worry, and doubts that many of you have expressed,” the newly elected president vowed to address the concerns of French citizens who feel left behind by globalization and modernity.

While many expect Macron’s victory to be positive for the common currency in the longer term, the euro slipped when markets opened. Likely due to overweight positioning ahead of the vote as peripheral risk of a Le Pen victory was not priced in, the euro retreated from six-month highs against the US dollar Monday morning. Macron must now focus on achieving a majority in parliament, a tall order for Macron who formed his En Marche! party just twelve months ago and currently holds no representation in the legislature.

Overnight gains for oil evaporated despite the best efforts of oil producers. Saudi Arabia’s Oil Minister said that OPEC supply cuts may extend beyond 2017, Russia and Kuwait echoed in turn – but we’ve heard this song and dance before. Further news that OPEC sources said that they and non-OPEC producers are considering extending the deal to curb production for another 9+ months have helped oil prices recover somewhat, but with US production continuing to fill the gap investors are unsure that this will be enough. Last week US drillers added oil rigs for a 16th consecutive week, adding fuel to the fire that is the global supply glut.

Fed members will take to the spotlight this week, starting with Cleveland Fed President Loretta Mester. Monday morning, Mester reaffirmed that employment was at the Federal Reserve’s target and inflation isn’t far behind. “We cannot overreact to transitory movements in incoming data,” she cautioned, a nod to the Fed’s assertion that the weakness in Q1 is transitory in their view. Mester also supported trimming some of the Fed’s $4.5 trillion-dollar balance sheet later this year. Right on cue, St Louis Fed President James Bullard has also advocated trimming the balance sheet sooner rather than later, and said that the Taper tantrum was caused by communication problems from the Fed, an error that they are clearly trying to correct this time around. Wednesday we have Eric Rosengren and Robert Kaplan, Thursday is Bill Dudley and Charles Evans.

EURUSD: As predicted, Emmanuel Macron emerged victorious in France’s elections this weekend, but his victory failed to inflate the euro as investors were more than pricing in this result. Now they will look to whether Macron can push a parliamentary majority in next month’s elections.

GBPUSD: Sterling weaker against the greenback as the USD enjoys a boost following the French elections.

AUDUSD: A bumpy ride for Aussie dollar on Monday, which gave up gains from the highest NAB business confidence reading in more than seven years after housing data and Chinese trade figures disappointed.

USDCAD: Canadian dollar is weaker against its US counterpart amid weaker oil prices this morning. Little in the way of domestic data will leave CAD open to peripheral drivers.

USDJPY: Macron’s win in France is pushing investors towards riskier assets, weakening the Japanese yen against the greenback.