FXTM Chief Market Strategist Hussein Sayed said the Emanuel Macron massive win in the French presidential elections which has sent the Euro on a seven-month is indicative of a reversal from the recent rise of ‘populism’ in the west.
“French say “no” to populism and “yes” to a united Europe following a similar trend in Austria and The Netherlands over the past six months.
“Macron’s decisive victory on Sunday is a clear sign of a resistance to populism after Trump’s election and the Brexit vote,” said the analyst.
With the Euro hitting a seven-month high, to trade above 1.10 against the dollar as an initial reaction, but pulled away in a classic “buy the rumor, sell the fact” style given that traders were already positioned for a Macron win.
The Euro appreciated by 2.5% since the first round of voting, suggesting that the good news was already priced in, and now it requires a fresh catalyst to determine the next move.
The next challenge for Macron is going to be the parliamentary elections in June, and given that there’s a lack of significant support, it remains highly uncertain whether the President can build a parliamentary majority.
“However, I don’t think this is going to be a major concern to the Euro.
“The next political risk event in the EU is the Italian general election, due to be held in March 2018.
“As there are ten months until this key event, investors and traders should shift their attention from politics to macro fundamental drivers,” said Sayed.
The key macroeconomic indicator from the Eurozone, along with fewer political risks, will likely lead to inflows of capital to European markets, especially as valuations look more attractive than the US.
But the Euro’s direction will be more influenced by the actions of the European Central Bank.
If the ECB is thinking of starting the tapering process, the next meeting on June 8 could be a time to announce the beginning of the exit.
“Therefore, I see more upside risk than the downside to EURUSD,” he said.