USD firm as treasury yields rise

Key Movers

Results from the first round of French presidential elections were front and center over the weekend. Current French president Emmanuel Macron and far-right challenger Marine Le Pen qualified on Sunday’s phase 1 of the elections, for what promises to be a tightly fought presidential election runoff in the April 24th decider. Opinion polls predict a very tight battle – with Macron just ahead – but only by a couple of percentage points. A Le Pen victory could send shockwaves through France and Europe in ways similar to Britain’s vote in 2016 in the Brexit referendum, and the next week two weeks could see a volatile period for the euro as polls indicate who could win. EURUSD was sitting at 1.0879 at the time of writing.

The pound remains under some pressure after slowing growth in the UK coupled with pressure on UK households from rising prices, making the Bank of England’s path of tightening monetary policy a murky one. The anticipation remains in the markets that the UK’s central bank will hike interest rates by 0.25% in their May meeting, however the path beyond this now remains uncertain, as stagflation starts taking hold in the UK. Wednesday’s UK CPI release could support the theory that the bank may need to rethink its strategy of tightening monetary policy by raising interest rates. GBPUSD was trading around 1.3034 at the time of writing.