April 2017 Market Overview

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The month of April was packed with major market-moving events. Politics remain in the focus during the month, with the French presidential elections and UK’s snap election announcement giving backwind to the euro and sterling. The ECB made no changes to its key interest rates or bond buying programme at the yesterday’s meeting. Let’s take a look at these events.

French Presidential Election

The French presidential elections set the tone for EUR trades in the coming weeks. One thing is sure – an eventual victory of Le Pen would hit the euro hard. With Le Pen building her campaign on an anti-European tone, threatening that France would leave the EU and Eurozone in case she becomes the next French president, the euro is put under enormous pressure not seen since the sovereign debt crisis in Europe.

The first round is already over, with the independent Macron and Le Pen going to the second round of elections on May 7th. Last Sunday, Macron gained 23.7 percent of vote, while Le Pen got 21.7 percent.

As the exit polls indicated a victory for centrist Macron, the euro hit a five month high against the dollar when the markets opened Sunday evening in Asia. The currency gained 2 percent on that day, hitting $1.0939 in early trading. EUR/GBP also rose 1.5% to .85 pence per euro. The market is confident that Macron will easily win against Le Pen on May 7th, with voices took over from Mr Melenchon as leftwing voters are committed to prevent Le Pen from gaining power.

EUR/USD forecast for May: Neutral to Bullish

UK’s Snap Election

British Prime Minister, Theresa May, surprised the markets with an early vote announcement on 18th of April. In the statement, May said that her government will start with the process for a snap election on June 8th.

The announcement of an early vote shocked the markets. The British currency gained more than 2% against the dollar, hitting $1.29 at the close of the day. This is a 6-month high sterling/dollar exchange rate. But the pound is still relatively weak compared to levels before the Brexit vote. Sterling is still down 11% against the dollar in the last 12 months.

The pound also gained 3% against the Canadian and Australian dollar, and Mexican and Argentine peso.

GBP/USD forecast for May: Neutral

ECB monetary policy meeting

The ECB didn’t make any major announcements as the central bank maintains the status quo. The ECB holds rates steady and follows through with a reduction in its QE program. ECB President Mario Draghi concludes that economic growth is picking up, and that risks are mostly external.

EUR/USD touched 1.0850 by the end of the trading day, reflecting market concerns over dovish monetary policy in the Eurozone. Market participants had expected a more hawkish response from the ECB, particularly after the results of the first round French election victory suggested a win for Emmanuel Macron.

What to look for in the coming month

May 5: Non-Farm Employment Change, USD

May 7: French Presidential Election, EUR

May 11: Monetary Policy Summary, GBP

May 24: BOC Rate Statement, CAD

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A self-taught trader, Kar Yong was once featured in Channel News Asia’s Money Mind Young Investor. He was also featured as a Social Guru on the eToro social trading platform where he led the path for more than a thousand traders in confusing market conditions by sharing his trading strategies through forums and blog posts. Today, he teaches his proprietary 4 Pillar Forex Trading Strategy to students from all over the world.

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