FX Markets Monthly Outlook – May 2017

The month of April saw one the markets pass through some of the significant headwinds to political uncertainty. In the Eurozone, all eyes were on the French elections which saw the first round of voting qualifying the centrist candidate Emmanuel Macron and the far-right leaning candidate, Marine Le Pen.

With the second round of voting due in a week’s time, the markets are however a bit relaxed at the prospects of a Macron victory. Elsewhere, the markets were a bit shaken up the US-led air strikes on Syrian basis after reports emerged the use of chemical weapons. At the same time, North Korea was back in the radar with apparent testing of missiles which led to a standoff between the US.

On the economic front, the latest inflation figures showed consumer prices taking a breather across most of the economies. In the Eurozone, headline inflation slipped from 2% to 1.5% which saw the ECB continue to maintain a dovish stance on monetary policy. The Bank of Japan’s meeting, as well as the BoC meetings, saw no changes to interest rates.

The surprise in April was certainly the British Prime Minister Theresa May calling for a snap election in June in a bid to solidify her position ahead of the Brexit talks. The British pound took the news in its stride, maintaining strong gains into April’s close.

Below is a brief summary of the market performance in April 2017.

Currency performance, April 2017

The month ahead: May 2017

With the first quarter done with, the markets will be looking to the month of May which is likely to bring with it, its own set of challenges. Here’s what to expect from the currency markets in May.

French presidential elections (May 7^th)

The second round of voting will take place on May 7th, Sunday where Emmanuel Macron and Marine Le Pen will face off. Mr. Macron is widely tipped to win the elections with a comfortable victory, however, the markets could remain cautious as a surprise result cannot be ruled out.