The Euro US Dollar (EUR USD) exchange rate rocketed up by over half a cent overnight on Monday as French Presidential candidate Emmanuel Macron was seen as the victor of the first French TV debate.
The independent candidate cemented his status as frontrunner when a snap opinion poll suggested that Macron was seen as the most convincing out of the five candidates in the debate.
Markets reacted well to the news, with the single currency strengthening as the debates were seen as a setback for far-right Eurosceptic contender Marine Le Pen, who currently leads in first round polls.
The two leading candidates traded barbs with one another, often clashing on divisive issues such as immigration and the ‘burkini’ swimsuit controversy, although Le Pen was criticised for treading the same old ground while avoiding discussing her economic policies outside of calling for a ‘patriotic economy’.
Meanwhile, centrist Macron was praised for his presidential tone as he went on the offensive against Le Pen’s populist policies in a calm yet compelling manner.
However, the other candidates began to round on Macron towards the end of the night as the former investment banker faced criticism for private donations made to his campaign, with Socialist candidate Benoit Hamon quizzing him on those who backed him, saying;
‘Can you assure us that those individuals do not represent industrial lobbies?’
Macron was quick to respond, pledging that he would ‘be controlled by no one’ and that he was ‘free’.
Macron’s performance will help some EUR investors shake off their concerns that Le Pen poses a major threat to the Eurozone, but with the final run-off still over a month away many traders are likely to remain skittish over the prospect of a Trump-level upset.
However, the Euro’s gains were muted somewhat this morning by the release of Spain’s Trade Balance as figures showed that the Spanish trade deficit jumped from -€2.45bn to -€3.13bn at the start of the year.
The data was not entirely downbeat however as exports reportedly reached a record high for January, increasing by 17.4% year on year, but were beaten by imports thanks to a surge in demand for energy over the cold winter months.
Meanwhile the US Dollar struggled to find strength yesterday following a speech by Chicago Federal Reserve Bank President Charles Evans.
Evans struck a similarly neutral tone to Fed Chair Janet Yellen last week, suggesting that the next Fed rate hike was unlikely to happen until June and that the central bank would likely only agree to two further interest rate hikes this year.
In his speech on Monday Evans told reporters;
‘June is a time where we will obviously have two meetings to assess how financial markets have evolved, everything happening in Washington and the likelihood of that, and the data evolving (including) whether or not prices are going up.’
Should the outlook of other Fed policymakers align with Evan’s forecasts during their own speeches later this afternoon it is likely that the ‘Greenback’ could cede further ground as USD investors give up on their hopes of additional monetary tightening taking place in the first half of this year.
Meanwhile the European Central Bank (ECB) will release its latest Economic Bulletin tomorrow. This may prompt a further rise in the Euro if it mimics the hawkish tone ECB President Mario Draghi adopted following the Bank’s recent monetary policy meeting.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.08 and the USD EUR exchange rate was trending around 0.92.