FRENCH PRESIDENTIAL ELECTION – After an extraordinary election campaign full of twists and turns, Emmanuel Macron won dramatic victory over Marine Le Pen in the French presidential election, taking 65% of the vote, with Le Pen collecting roughly 35%, according to early estimate from four separate French pollsters. Macron, 39, will become the youngest president of France’s Fifth Republic. There will be no Trump or Brexit moment in France and stability inside the Eurozone remains. Not to mention stability of EUR/USD.
APRIL US JOBS
The US created 211k net new jobs in April, a sharp bounce back from the downwardly revised 79k gain in March. It is the third month this year that the US created more than 200k new jobs. The unemployment rate slipped to a new cyclical low of 4.4% from 4.5%, signaling that the labor market remains healthy and should support continued increases in consumer spending.
The 211,000 increase followed a 79,000 advance in March that was lower than previously estimated, a Labor Department report showed Friday. The median forecast in a Bloomberg survey of economists called for a 190,000 gain. While the unemployment rate is now the lowest since May 2007, wages were a soft spot in the report, climbing 2.5 percent from a year earlier.
After crude-oil prices took a beating over the past week, falling to their lowest level since before OPEC-led a deal to curb output in November, analysts at Goldman Sachs say crude may reaching a “capitulation” point.
OBAMACARE REPEAL PASSES HOUSE
House Republicans mustered just enough votes to pass their health-care bill Thursday, salvaging what at times appeared to be a doomed mission to repeal and partially replace Obamacare under intense pressure from President Donald Trump to produce legislative accomplishments. The 217-213 vote sends the American Health Care Act to the Senate, where it has little chance of being passed in its current form by fellow Republicans spooked by reports the plan would cause millions to lose health insurance.
China’s capital controls appear to have effectively slowed capital outflows, while under-performance of the equity market and bearish sentiment toward the yuan has discouraged capital inflows. Reserves rose ($20.45 bln to $3.03 trillion) for a third consecutive month in April as capital controls bit and the dollar’s decline flattered the valuation of other currencies in reserves. Even if capital flows have slowed, trade linkages remain significant. Its supply and demand for industrial metal may not be the only consideration, but it is a major driver most of the time. It is expected to report a moderation of both imports and exports (in dollar terms).
Slower growth in imports and exports is not inconsistent with a larger trade surplus. It is expected to rise to around $35 bln from $24 bln. There is also a large seasonal component. China’s trade surplus has widened in April over March for the last seven years and in nine of the past 10. Tame consumer prices will create scope for stimulus if economic slowing becomes too pronounced, and in the meantime, officials can focus on curbing some of the excesses, including lending and leverage.
USD/CAD posted an impressive streak is it rallied for ten consecutive sessions prior to turning lower at the end of the week. Friday’s decline did not only serve to snap the bullish run in the pair but the single day drop erased gains from the early week. As a result, USD/CAD has printed a bearish shooting star on a weekly chart and a bearish engulfing candle on a daily chart. The candlestick patterns hints of a turn lower, however, there are major technical developments driving oil prices, suggesting declines may be short-lived. Last week, the pair closed at its highest level on a weekly basis in over a year.
The GBP/JPY has greater volatility, roughly double the volatility of the EUR/JPY. Not an exact science, but click on the month chart and zoom out. The EUR/JPY has an all time range of about 20k pips, the GBP/JPY has an all time range of about 44k pips.
AUS CONSTRUCTION AUD/ASD
The Reserve Bank of New Zealand meets next week and policy is on hold. There is no urgency. Australia’s fiscal policy eclipses monetary policy. Infrastructure spending (rails, roads, and a new airport). Over the past month, the Australian dollar has been the weakest of the majors losing about 2% against the US dollar. It staged a sharp recovery before the weekend, not as technically robust as the Canadian dollar, but promising.
Moody’s Investors Service just released New Zealand’s annual credit analysis and says that New Zealand’s Aaa rating and stable outlook are supported by the sovereign’s very high economic resilience, and a strong fiscal position compared to peers. Combined with effective institutions and policies, these credit strengths mitigate New Zealand’s vulnerability to shifts in external funding or a turn in the housing market..
High income levels, robust population growth and continued strong Asian demand for New Zealand’s products and services, including dairy, tourism and education, support the country’s very high economic strength. As such, Moody’s expects real GDP growth of around 3.0% through 2017 and 2018, above the Aaa median of 2.0%.