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Tensions ease as Macron moves through round one; Euro rallies

BY MATT RICHARDSON

The Australian Dollar traded within a 30-pip range on Friday between 0.7515 and 0.7546 as geopolitical tensions regarding Syria and North Korea and concerns about the French presidential election continued to weigh on risk sentiment. There was no local data to report from Friday and therefore the Aussie looked offshore for direction. A mixed bag out of the United States capped any moves on the AUD/USD but gapped nearly 40 pips higher on the open this morning following the results of the first round of the French presidential election, early results showing that Emmanuel Macron and Marine Le Pen have qualified for the second round of the election. No local data due today and tomorrow the markets will be closed observing the ANZAC bank holiday. 

The New Zealand dollar jumped marginally higher through trade this morning, advancing back above the 0.70 handle. Markets demand for risk based and commodity driven currencies increased in early trade as the likelihood radical far right candidate Marine Le Pen will take office diminished following the first round of voting in the French election. With little domestic data on hand to drive direction the NZD is at the mercy of offshore stimuli and with the French election dominating risk demand the Kiwi could find support as polling is completed. With resistance still firmly entrenched on moves toward 0.7075 and 0.7130 we still expect topside gains to be relatively muted throughout trade today. 

The Great British Pound ended the week higher across the board boosted after Prime Minister Theresa May’s called for a general election that triggered rally in the pound sterling. The GBP/USD reached a six-month high of 1.2836 after Prime Minister Theresa May surprised markets by calling a snap general election in June. Chancellor Philip Hammond said the strength in the Sterling was a sign of confidence that the markets have in the future of the country. The GBP/USD is currently trading at 1.2811. We now expect support to hold on moves approaching 1.2745 while any upward push will likely meet resistance around 1.2860. The pound also hit a four-month high against the Euro of 1.1936.

The Euro jumped upward in early trade this morning rallying to 5 month highs and moving back through 1.09. Early polling suggests both Macron and Le Pen will move through the first round of the French elections easing concerns of a run off between disruptive and radical candidates. Macron is highly touted as the only candidate capable of defeating far right nationalist Marine Le Pen and his advance reduces anxieties and political uncertainties that have plagued the Euro in the run up to this election. As markets prepare now for a Macron victory the upside potential for the Euro comes into focus as the ECB will be expected to maintain its QE reduction plan, while Emerging Markets and risk driven currencies find support. With attentions squarely focused on the French Election we can expect the Euro to push toward 1.10 in the immediate short term with further gains toward 1.12 should Macron take office on May seven.