The euro continued its recent ascent thanks to the market-friendly outcome of the German regional election, and previously the French general election. When the single currency rises in a “risk on” market environment, the euro/Japanese yen (EUR/JPY) currency pair is usually the euro pair that tends to outperform as the safe haven yen takes a back seat.
Ahead of the Bank of England’s monetary policy decision on Thursday, the pound is little-changed at the time of this writing. The GBP/USD continues to hover around the 1.29 handle, while the EUR/GBP is down for the fourth day. The cross has nearly filled the gap that was left behind after the first round of the French election.
With the Bank of England and European Central Bank slowly turning neutral, maybe it is time the market turned its attention to the Swiss franc again because the SNB is still pretty much dovish. Interest rates are unlikely to be raised anytime soon due to the lack of inflation in Switzerland. What’s more, the Swiss National Bank is still intervening in the forex markets as it firmly believes the franc remains overvalued.
A classic reaction in the markets to the outcome of the French elections. It was widely expected that pro-euro centrist Emmanuel Macron was going to become the new President of France and that he would beat the euro-sceptic Marine Le Pen by a wide margin. And so it proved.
The euro/U.S. dollar currency pair gained 0.777% during the week. The single currency is trading at 1.0987 after a period that was high on political risk with the French presidential elections entering their final stretch. The televised debate between the two candidates was an entertaining affair but failed to change the odds by much.