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Europe breathes easier as Macron eases to victory

Last week saw strong gains for European markets on the back of expectations that Emmanuel Macron would romp home in the second round of the presidential vote in France at the weekend.

As expected that is exactly what happened with the relative newcomer and independent candidate securing 65% of the vote, and confirming what the opinion polls had broadly been telling us for the past two weeks.

While politicians in Europe let out a collective sigh of relief what the result can’t disguise is the level of voter dissatisfaction in France as a whole, given that nearly half the French electorate still voted for parties who ran on an anti-globalisation ticket.

Knowing all of this the new French president may well find that winning was the easy bit. It’s all well and good running on a ticket of cutting 120,000 public sector jobs, a €60bn cut in public spending and a lowering of the unemployment rate to 7%, it will be another getting it through the French parliament.

New elections for the French parliament take place in June and while he won the presidential vote by a large margin, investors would do well to remember that was because who he was up against. The parliamentary vote is likely to be another ball game entirely.

For now European markets look set to take a positive cue from the weekend events, as well as another record close for US markets after Fridays US jobs report which saw unemployment hit a 16 year low of 4.4%.

This largely came about as a result of a drop in the labour participation rate from 63% to 62.9%, and while this should be seen as a welcome development it also needs to be put into context. Back in May 2001 there were a lot more people in the workforce with the participation rate at a much healthier 66.7%.

The report itself was somewhat of a mixed bag, but it didn’t stop investors increasing the odds further that we’d see a move in rates next month. This was despite the fact that wages growth saw a sharp drop from 2.7% to 2.5%, while the March jobs number was revised lower to 79k from 98k. The weakness of these sorts of wages numbers are not necessarily the types of numbers associated with an economy firing on all cylinders.

Oil prices are expected to remain in focus this week after last week’s 6.5% decline, and despite a decent rebound on Friday.

Last week’s rout increases the pressure on both OPEC and non-OPEC members to try and agree something when they meet later this month if only to try and put a floor under prices, and the mood music coming from Saudi Arabia and Russia does appear to be leaning in that direction.

The problem remains US shale and the ability of these producers to continually add capacity faster than demand is able to diminish inventories. That, combined with concerns about a slowdown in Chinese demand, reinforced by weaker than expected import numbers for April, could well limit the upside initially after last week’s plunge through the March lows. Chinese imports for April rose 11.9% in April, a much slower rate than March and weaker than expected.

Also on the agenda this week will be the latest Bank of England rate decision, as well as quarterly inflation report. At the last meeting we saw external MPC member Kristin Forbes break ranks from the consensus and vote for a rate hike, so it will be noteworthy as to whether the slowdown in Q1 GDP has caused her to have any doubts, or whether any other members feel compelled to join her in dissenting later this week.

EURUSD – the move through the 1.1000 area could well precipitate a move towards the 1.1200 level. Solid support comes in at the 200 day MA and 1.0820 area.

GBPUSD – momentum remains positive for the pound despite last week’s dip to 1.2820, with the 1.3000 area the next key hurdle to overcome, for a move towards 1.3300. Only a move below 1.2750 argues potentially back towards the 1.2600 area.

EURGBP – resistance currently around the 0.8520/30 area, and above that at the 0.8570/80 area where the 50, 100 and 200 day MA’s converge on each other. Solid support remains near the 0.8410 area.

USDJPY – while trend line resistance at 113.10 holds the risk of a return to the 111.60 area is a risk. A break through 113.20 could well see a test of the March highs around 115.00.


Heightened market volatility is likely over the election period, this could result in widened spreads. We recommend that you monitor positions carefully, consider the use of appropriate risk management tools and maintain a sufficient account surplus throughout this period.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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