The Euro has been in downtrend against the US dollar since mid-2016, with first stronger acceleration lower being triggered on Brexit vote in June 2016 and the second strong depreciation was seen after US presidential election.
The European bloc’s unity has been under threat from Grexit two years ago, with fears of beginning of potential end of economic and political union, keeping the single currency under constant pressure.
Signals from referendums in two of the world’s largest nations showed that voters prefer nationalistic and closed model that is now threatening to spill in France on threats of repeating scenario from Great Britain.
The Euro started its descend that lasts for one year from May 2016 peak at 1.1600 zone as Brexit referendum neared and US Federal Reserve signaled interest rate hike towards the end of the year, as indicators showed that US recovery was gaining traction after weak first two quarter of the year.
Pressure on the single currency had intensified after British electorate voted to leave the Union that raised fears of the future of the bloc after one of three biggest economies exits.
Additional pressure came on Fed’s decision to increase interest rates by 0.25% in December 2016 and another hike in March 2017 that widened the gap between US and the Eurozone which kept 0% refinancing rates and negative deposit rates of 0.4%.
Next hit for the Euro were US presidential elections and victory of Donald Trump, whose campaign promises strongly boosted the greenback and sent the single currency to multi-year low at 1.0350 zone. During the early Nov / mid-Dec period the Euro fell nearly 7% against the dollar.
The Euro has since then been in consolidation phase with limited upside and maintaining risk of fresh weakness on the outcome of French elections.
Far-right candidate for the National Front, Marine Le Pen has a high probability of taking part in the second round. As one of her main targets is France’s exit from the EU, strong pressure on the Euro could be anticipated on such scenario.
The pair faces strong supports at 1.0500 zone and 1.0350, with stronger acceleration towards parity level being on the table.
On the other side, victory of another candidate could ease pressure on Euro which may regain strength for renewed attack at its upper targets at 1.0900 and psychological 1.1000 barrier.
Gold has regained its safe haven appeal and is in strong uptrend in the first three months of 2017. Since the politics became one the key market drivers, increased political uncertainty prompted investors to move into safe haven assets.
The yellow metal hit its lowest levels in 2016 in mid-December, when Gold price decelerated on significantly stronger dollar after US presidential elections, but inconsistent momentum of President Trump’s administration has reduced attractiveness of the US dollar, prompting Gold price to make U-turn.
Renewed strong demand for Gold pushed the price significantly higher, to post series of fresh yearly highs.
Official start of Brexit process was another support for the precious metal, as uncertainty on two-year divorce process between the UK and the EU, will likely keep investors in safer assets.
The latest geopolitical crisis that broke on North Korea’s missile tests and US attack at Syrian army’s bases, was fresh boost for gold, on expected reaction of markets in such occasions.
The yellow metal is at highest levels since early November 2016 and is awaiting results from French elections, which is next key event.
Investors are likely to continue safe-haven buying to hedge against a worst-case scenario – Frexit.
Crude oil price is approaching its highest levels in past two years, on renewed strength on agreement of OPEC and non-OPEC oil producers to curb oil production and reduce pressure on oil price on fears of global oversupply.
The agreement that took almost one year to materialize started from initial attempts to freeze oil production and extended to cut the output in order to stop oil price fall.
The agreement was made for the first six months of 2017, but oil producers were in talks to extend it for another six months and give fresh boost to existing oil-price recovery process and prevent negative impact on oil price from increasing shale oil production in the USA.
Rising geopolitical tensions over North Korea and Middle East that threaten to escalate provided an additional support to oil price that extended its recovery phase and remaining well supported for now.
However, oil prices are not expected to be directly impacted on the outcome of French elections, but it could become more volatile if results of elections stronger impact global markets.
French Stocks markets are expected to reflect the sentiment of outcome of French elections, as stocks are usually in the first row of financial instruments to be affected by economical and political events.
French benchmark index CAC40 is in stable medium-term uptrend, which could be seriously affected on the victory of far-right candidate that would result in the exit of France from the European Union.