This week, the biggest news comes from France, as they battle their way through an election period. With some candidates likely to exit the UE and others likely to remain in, any outcome is sure to have a large market impact. Around the world, Venezuela still suffers, the US is moving toward a trade deal with the EU, and US Treasury Secretary calls on the IMF to “enhance surveillance.”
France Votes for Presidential Finalists After Tight Campaign. Votes appear relatively split between four very different candidates. Marine Le Pen wants to pull France out of Europe’s single currency; Communist-backed Jean-Luc Melenchon wants to remake the rules governing monetary union; Francois Fillon, proposes tough economic reforms; and Emmanuel Macron, a centrist pro-European.
Early projections suggest France’s far-right leader Marine Le Pen will face a relative novice, the independent centrist Emmanuel Macron, in the final round of the country’s presidential election.
Charles Gave, founder of Hong-Kong based asset-allocation consultancy GaveKal Research, who predicted the triumph of Donald Trump in the U.S. election, is now betting on a win for Marine Le Pen. A Le Pen victory would mean an almost certain tanking of the Euro.
Via Reuters: U.S. Treasury Secretary Steven Mnuchin on Saturday called on the International Monetary Fund to enhance surveillance of its members’ exchange rates and external imbalances, as large trade imbalances would hamper “free and fair” trade. Mnuchin called on countries with large external surpluses and sound public finances – likely a reference to Germany – to expand fiscal stimulus to boost growth and help narrow trade imbalances. He also urged the IMF to scrutinizes its member nation’s exchange rates and identify “specific policy adjustments” for each country to counter global imbalances.
Times: As reported by the Times, President Donald Trump warmed to the idea of a deal with the EU, leaving the United States able to strike a free-trade agreement with the European Union.
Germany’s Angela Merkel persuaded Trump that talks on a deal would be simpler than he thought, the newspaper said. Previously, he only expressed interest in dealing with Germany; Merkel made it clear the deal would be with the whole bloc.
Britain will not be free to agree new trade deals until it has left the EU in 2019.
Tax reform and tax reduction to be released Wednesday, per President Trump.
Fitch Ratings has downgraded Italy’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘BBB’ from ‘BBB+’. The issue ratings on Italy’s senior unsecured foreign- and local-currency bonds have also been downgraded to ‘BBB’ from ‘BBB+’. The Country Ceiling has been revised down to ‘AA’ from ‘AA+’. Other measures are stable.
The Consumer Price Index (CPI) rose 1.6% on a year-over-year basis in March, following a 2.0% gain in February. Opinions on whether it makes for a bullish USDCAD trade are mixed, some saying it’s too obvious.
Venezuela, owner of the world’s largest oil reserves, is suffering an economic collapse, sparking massive protests against the government and President Nicolás Maduro. “The country is in [its] worst shape in two decades,” said energy economist James Williams. Adding to the nation’s woes, oil shippers are now seizing cargoes and going to litigation over Venezuela’s apparent failure to pay for shipping Auto maker General Motors GM announced Thursday that it had ceased operations in Venezuela “due to an illegal judicial seizure of its assets.” Venezuela “wasn’t exactly a welcoming climate for foreign investment before the current [economic] turmoil, but it’s especially troubling in this environment,” said Robbie Fraser, commodity analyst at Schneider Electric.