Macron’s French victory rallies euro to six-month high

Macron’s victory at France’s presidential election this weekend sent the euro to a six-month high against the dollar.

The single currency soared on the back of the news that Emmanuel Macron, a pro-EU centrist, had been voted into office ahead of far-right nationalist Marine Le Pen. A former investment banker, Macron is an economic liberal and, despite serving as minister of the economy under President Hollande, entered the presidential race as an independent, neither right or left of centre.

That approach, combined with his natural charisma, has paid off, winning two-thirds of the vote compared to Le Pen’s one-third. It is a result that was anticipated and welcomed by the property industry, especially after the disruptive, unpredictable results of the UK’s EU referendum and President Trump’s US election victory last year.

Macron’s path forward will be far from smooth: after forming his own party only a matter of months ago, he has now elected representatives in parliament to help support his plans. Indeed, the upcoming parliamentary elections on 11th and 18th June will be major factors in the success of his presidency.

Nonetheless, the prospect of relative stability helped strengthen the euro against the greenback, with the currency rising to a six-month high of $1.1024 this morning. While it has since falling back to $1.0955, the euro is now 2.5 per cent higher than it was before the French elections began.

Euro rebounds after Italy referendum drop

8th May 2017

The euro has rebounded after an initial drop in reaction to Italy’s constitutional referendum.

The vote, which took place on Sunday, saw the public head to the polls to decide whether to approve the overhaul of the country’s constitution. With 59.1 per cent of the 68 per cent turnout voting no, though, Prime Minister Matteo Renzi announced on Monday that he would formally submit his resignation to the Italian president. The president now has a window to put together a new caretaker government and prime minister.

The anti-government vote follows two similarly dramatic referendums in recent months: the US presidential election and the UK’s vote to leave the European Union. Both have introduced elements of political uncertainty to the global stage, but have also impacted currency exchange rates, which have had knock-on effects for business, investors and real estate markets.

While the pound weakened, making UK real estate more attractive to overseas investors, the dollar has since strengthened, boosting confidence in the US economy and market. Following Italy’s referendum, the euro plunged to a 20-month low against the dollar, suggesting that a negative trend could be established. Since then, though, the single currency has rebounded to a two-week high of $1.075.

Lee Hardman, currency analysts at MUFG, told The Independent that this is because the Italy vote was already expected, unlike the Brexit and Trump victories, so the market had already priced in the political risk.

“The broader financial market impact has, so far, been relatively limited as evident by only modest gains for traditional safe haven currencies like the yen and Swiss franc. Investors are not expecting financial market stability to be disrupted significantly in the near-term.”

The currency trading world and wider business professionals are now waiting for Thursday, when European Central Bank chief Mario Draghi will outline his plans for quantitative easing for next year, which will give a better idea of the single currency’s performance in the future. Indeed, if the bank decides to taper off its monthly bond-buying amounts, as many have predicted, it could be taken a positive endorsement for the euro.

London’s City Index Direct chief analyst, Kathleen Brooks, says the single currency remains in a strong position within the G10 FX space, despite some concerns that Italy’s vote could eventually lead the country towards exiting the euro.

“As Italy’s banking sector can scrape together some foreign investment, mixed with a sweetened nationalised deal for Monte dei Paschi, then we can’t see how Italy’s political woes can have anything other than a temporary impact,” Brooks told Reuters.