Missiles up, dollar down
While North Korea’s missile tests over the weekend may have turned out to be failures markets are still pricing in a significant amount of fear from geopolitical moves that will play out further this week. The Japanese yen gained through the most part of last week but has since weakened, allowing USD/JPY back above the 109.00 level. This dollar strength here has not played across into other markets however with the greenback under pressure still against the euro and the pound as we open up the day here in Europe.
Tax reform slow to come
The dollar pressure still stems from continued clarifications from the Trump White House that tax reform, on which a large part of the dollar rally since the election of Donald Trump has been based, will take longer than thought. Steve Mnuchin, the US Treasury Secretary told the FT in an interview that the goal of getting tax reforms passed by August was,
"highly aggressive to not realistic at this point” and despite his boss’s calls for a weaker dollar added that “over long periods of time the strength of the dollar is a good thing.”
Vice President Mike Pence is in South Korea at the moment and should any country be in contravention of the Trump’s sabre rattling on currency manipulation then it is South Korea.
All to play for in France
The French Presidential election is only 6 days away from voting in the first round with the frontrunners of Macron, Le Pen, Melanchon and Fillon all in and around the 20% mark. As a reminder should no candidate win 50% of the vote in the first round then a second round will take place a fortnight later between the highest two. At the moment that looks like a battle between Marine Le Pen of the Front National and Emmanuel Macron of the centrist En Marche.
The euro and the yield levels on French debt are the two barometers of risk that we will be using on the election have done little over the past week or so although any further gains for Jean-Luc Melanchon may make the euro sell off into the Friday close ahead of Sunday’s vote.
Brexit back from a break
The House of Commons are back in session today following their Easter break. News on Brexit over the weekend has been staggeringly quiet although the government’s belief that it will be able to convince the European Banking Authority and the European Medicines Agency in London post-Brexit has confused many. News of a potential trade deal with India worth £2bn has also been trumpeted. UK trade with the EU in 2016 was worth £240bn.
The data calendar is quiet with news picking up tomorrow.