James Trescothick

Education Manager at easyMarkets. Passionate about the markets, the excitement, the story driving the markets at the time, the fundamentals and even the technicals.

Politics takes center stage for the single currency in April with elections in France and the start of the Brexit negotiations. Meanwhile, across the Atlantic, the Trump administration struggles to implement their policies creating uncertainty for the greenback and equity markets.

Don’t forget the Easter holidays with Good Friday on 14 April and Easter Monday on 17 seeing the markets close in most regions.

French Election – first round
The first round of the French presidential election is set to be held on 23 April and it may be a close finish for who will be the next president. The race is being hotly contested between the Republican candidate Francois Fillon, En Marche founder Emmanuel Macron and National Front Leader Marine Le Pen.

Should Marine Le Pen win the French presidency the direct effect on the euro currency may be seismic. The Front National mandate promise to their French electorate is to leave the European Union, and to have their own Brexit style break up from the EU, adopting the French Franc and gaining back control of their borders.

Foreign exchange markets will certainly be on edge as the election date nears and traders will be looking to early poll results as we head towards the final vote.

Brexit Negotiations
With the official triggering of article 50 by Theresa May on 29 March the European union now begins negotiations with the United Kingdom. The position of the EU will be strengthened going into negotiations if the French election delivers a positive result for either of the two leading pro-Europe candidates – Francois Fillon or Emmanuel Macron. A Marine Le Pen win however may impede Europe from presenting a strong united front going into the Brexit negotiations.

Donald Trump and USD
The failure of the Trump administration to pass through their changes to the Obamacare medical bill, caused the market to question the ability of the new U.S President and his administration to implement their pro-growth policies for the U.S going forward.

Traders sold stocks and the US dollar in March, and indeed the dollar suffered heavy losses, and erased much of the gains made on the initial enthusiasm that a pro-growth Donald Trump brought with him.

It is now crucial for the dollar and equities that President Trump regains the confidence of the market, and regains the upper hand to pass his growth policies in US congress.

Important Data Releases as the Month Begins

April 3: German Manufacturing data (March)
The manufacturing engine of Europe is expected to show a strong reading of 58.3 for the month of March, as manufacturing continues to power the domestic German economic growth story.

April 5: US ISM Manufacturing (March)
The market will be looking to ISM manufacturing data for clues as to the health of the US manufacturing sector. The market expectation is for an expansionary reading of 57, slightly below the 57.7 figure posted in February.

APRIL 5: FOMC Minutes
The Federal Reserve also releases the minutes of their previous March meeting. The statement will be scrutinized by traders for any change in the language or tone from the FED as to their monetary policy going forward.

With the US raising their key interest rate in March, it remains important to the markets that the FED continues to strike a Hawkish tone towards the US economy.

Janet Yellen and other Federal Reserve voting members have highlighted that should the economy continue to grow at a gradual pace, two further rate hikes in 2017 would then be appropriate.

APRIL 7: U.S Nonfarm Payrolls (March) & Key Unemployment Rate
Nonfarm payrolls data is released for the month of March and is expected to show +185K jobs created for the US economy. Any strongly negative deviation from this expected number should see the single currency well supported. The headline figure is forecast to dip below the +235k jobs created in February as seasonal effects take hold.

A figure below +100k would be considered bad for the US economy and euro positive, as the FED may pause the rate hike cycle at their next meeting and need further data releases before proceeding to hike.

The Key unemployment rate for March is expected to hold steady at +4.7%, matching the figure set for February. The rate has held steadily under 5% in 2017 as the US continues to steadily create jobs in the manufacturing, retail and construction sectors.

How the EUR/USD Performed Last Month

The Euro hit a high of 1.0905 in March, but failed to hold onto much of the gains it made going into April. As we can see from the chart below 1.0710 remains a key pivot for EUR/USD traders.

graph

Technically the Euro remains bearish whilst underneath 1.0840. The trendline break above provoked a strong sell off in the EURUSD. Key Resistance levels are now located at 1.0840 and 1.0905. Support levels now sit at 1.0600 and 1.0555. A move below 1.0600 may provoke a strong sell off towards 2017 lows for the EURUSD.

 

 

http://www.bbc.com/news/world-europe-38220690

http://www.telegraph.co.uk/news/2017/03/24/donald-trumps-obamacare-repeal-bill-hangs-balance-republicans2/

https://www.investing.com/economic-calendar/

 

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