Macron and Le Pen to fight out run-off
Following the events over the past year that have seen Brexit approved, Trump win in America and Erdogan take over totally in Turkey, it was typical that France would vote exactly as the polls suggested it would.
In the current climate, it is hard to say whether the fact that none of the popular centre-left or centre-right parties will contest the run-off on May 7th is a surprise. It is, however, the first time this has happened in sixty years.
The euro reacted very positively to the result opening almost 2% higher against the dollar although it quickly halved that gain. The story of euro gains was similar against all major currencies.
We now face a further two weeks campaigning before the run-off. Jean-Luc Mélenchon, the hard-left candidate who polled 19% of the vote has already said that since he holds no mandate to do so, he won’t be endorsing either Macron or Le Pen.
Back to economics for a few days
The European Central Bank meets on Thursday to discuss monetary policy for the eurozone.
There is unlikely to be any change although a reduction in extraordinary measures is possible. Germany needs tighter monetary policy to help it fight inflation, which is rising by between 0.5% and 0.7% per month.
The Bank of Japan is also meeting this week and will once again “thumb their noses” at the U.S.
Despite the (constant) threat of being labelled a “currency manipulator,” the world’s third largest economy will maintain its ultra-easy monetary policy.
The yen is likely to be driven more by events on the Korean peninsula than the Japanese economy which has been managed in the same manner for decades.
U.S. Durable Goods Orders are unlikely to light a fire under markets, so we can start to look forward to the long weekend followed by the monthly U.S. employment bunfight.
It is easy to be lulled by the “knowledge” that Macron will be elected, the EU will survive and we can move on to the other certainty: a Conservative victory in the UK.
Perhaps 2017 will see return to normality and markets will behave accordingly. There is always a shock around the corner and the trick of being a successful trader, or at least keeping your head above water, is to be on holiday when one happens.