NZD opens at 0.7040 USD making small gains on most of the crosses; EUR jumped up to 1.0930 USD this morning, up 1.8%, after exit polls indicated that Macron would be the likely winner of the French election; CAD and NOK lower as WTI Crude Oil fell 2%

By Jason Wong

As the new week begins, the results of the French Presidential election are streaming in.  A number of exit polls give centrist Macron and far-right Le Pen the nod to make the second round run-off on 7 May.  This is the market-friendly outcome that the polls pointed to but there was always the chance of a rogue result.  Macron should defeat Le Pen convincingly in the second round, as the other mainstream parties rally against Le Pen and offer their support for Macron.

With the risk of an adverse French election result now cleared, EUR has jumped by 1.8% to 1.0930 in the first ten minutes of trading from the Wellington open.  NZD/USD is trading slightly higher around 0.7040, taking NZD/EUR down to 0.6440.  Higher risk appetite has seen the yen fall about 1.3%, taking NZD/JPY up to 77.8.  Liquidity is thin and the market is jumpy.  The tables contained in this report are based on Friday’s close.  It will take a good 24 hours before the market settles down.

On Friday, it was a fairly subdued end to the trading week as traders looked ahead to Sunday’s first round French Presidential vote. Currency movements were modest, US equities were down slightly while UST rates were up slightly.

There were a number of economic data releases, but they were largely ignored, or any market reaction proved to be temporary.  Sales of previously owned US homes rose more than forecast in March to the fastest pace in a decade.  Euro area PMIs continued to nudge higher, with the composite reading rising to a 6-year high and evidence of a broadly based economic expansion. UK retail sales were much weaker than expected, but the negative reaction to GBP wasn’t sustained.

Oil prices fell around 2%, with the WTI measure closing back below USD50 per barrel.  With the oil rig count in the US on a rising trend, traders are concerned that rising US production is more than making up for the OPEC-driven production growth freeze.  NOK was the worst performing currency, falling 0.5%, followed by CAD, losing 0.2% against the USD.  Other major currencies managed modest gains against the USD, but no more than 0.2%.  It was a subdued trading session, with traders not willing to take on fresh positions ahead of the French vote.  EUR ended the week on a slightly positive note, ending around 1.0730.

The NZD ended the week around 0.7030, well within the 0.69-0.71 trading range the currency has been stuck in over the past seven weeks.  Small gains on most of the crosses were made for the session.

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