EUR/USD – Euro Steady as Macron Wins Landslide Victory in French Election

The euro has edged lower in the Monday session, as the pair is currently trading at 1.0940. On Sunday, Emmanuel Macron easily defeated Marie Le Pen to win the French presidential election. It’s a quiet start to the week, with no major events out of the eurozone or the US. Still, there was some positive news in the eurozone, as German Factory Orders gained 1.0%, above the forecast of 0.7%. As well, Eurozone Sentix Investor Confidence climbed to 27.4, beating the estimate of 25.3 points. The indicator has now improved over four consecutive months, pointing to stronger confidence among investors and analysts.

Emmanuel Macron has become France’s youngest president at age 39, and he rode to victory in convincing style. Macron won 64% of the popular vote, with Marie Le Pen taking 36%. Macron’s margin of victory was larger than the polls predicted, but the markets had priced in a decisive win, so the euro has showed little response to the election results. Although Macron certainly “won big”, it should be noted that fully one third of French voters either abstained or voted a blank ballot as a protest vote. This means that Macron was viewed by many voters as a default choice, given that his opponent was the leader of the far-right and has been accused of being racist and xenophobic. The French elections now enter a new phase, with parliamentary elections slated for mid-June. Macron’s En Marche! party is barely a year old and is unlikely to win a majority, which would mean a power-sharing setup in parliament, likely between Macron’s party and the center-right. Similar to the presidential election, the parliamentary election is full of uncertainty, and opinion polls during the election campaign will be important as fundamental releases and should be treated as market-movers.

French Election Timeline

May 7 – Emmanuel Macron wins French presidential election

May 11 – Official proclamation of President Emmanuel Macron

May 14 – [from midnight] End of Francois Hollande’s mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections

US employment numbers were generally strong on Friday. Nonfarm Payrolls improved to 211 thousand, easily beating the forecast of 194 thousand. The unemployment rate fell to an impressive 4.4%, compared to the estimate of 4.6%. This was the lowest rate since May 2007. The news was not as positive from wage growth remained weak at 0.3%, matching the forecast. Still, with such little slack in the labor markets, we should see wage growth start to move higher. If that happens sooner rather than later, the Fed will have to reconsider a third rate hike in 2017. As things stand now, two more moves is the likely scenario. The positive job numbers have cemented a rate hike in June, as the odds of hike are up to 83%, according to the CME Group.

EUR/USD Fundamentals

Sunday ( May 7)

• French Presidential Election

Monday (May 8)

• 6:00 German Factory Orders. Estimate 0.7%. Actual 1.0%
• 8:30 Eurozone Sentix Investor Confidence. Estimate 25.3. Actual 27.4
• 14:00 US Labor Market Conditions Index
• Tentative – US Loan Officer Survey

*All release times are EDT

*Key events are in bold

EUR/USD for Monday, May 8, 2017

EUR/USD Monday, May 8 at 6:30 EDT

Open: 1.0964 High: 1.0997 Low: 1.0936 Close: 1.0941

EUR/USD Technical

EUR/USD edged higher in the Asian session but has given up these gains in European trade

• 1.0873 is providing support
• 1.0985 is an immediate resistance line

Further levels in both directions:

• Below: 1.0873, 1.0708, 1.0616 and 1.0506
• Above: 1.0985, 1.1122 and 1.1242
• Current range: 1.0873 to 1.0985

OANDA’s Open Positions Ratio

EUR/USD ratio is showing long positions with a majority (62%), indicative of EUR/USD continuing to move to lower ground.

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