Last week, the backlash against European austerity packages put pressure on the UK’s coalition government, the Conservative’s losses were slightly lessened by the fact that Boris Johnson, the current mayor of London, narrowly won his bid for re-election.George Osborne said on Sunday that big losses for government parties in local elections on Thursday didn’t represent a rejection of his austerity program, but instead a plea from voters to focus on fixing the economy.
GBPEUR broke the 1.24 barrier following French presidential elections. The pair peaked at 1.2445 at 22:00 on Sunday, the highest level for sterling since November 2008. Last week’s resistance of 1.2345 now acts as a support and a close back under this level will be required to relieve immediate pressures.
GBPUSD traded within a 71 pip range over the bank holiday moving from 1.6118 on Monday morning peaking at 1.6189. With risk aversion the key theme of the week so far there is a risk of fresh weakness down below 1.60. However with sterling currently being the traders favourite, support levels of 1.6120 and 1.6057 could prove resilient.
Last Friday, US Non-Farm Payrolls grew by only 115,000 in April, but on aggregate the release was pretty neutral because of the positive revisions previously.
The total US unemployment rate has fallen again, hitting 8.1% in April , its lowest level since Jan 2009 but this was due largely to a contraction in the labour market rather than acceleration in job growth.
France’s socialist candidate Francois Hollande won the presidential election on Sunday with a reported 51.62% of the votes cast. Sarkozy becomes the 11th Eurozone leader to be ousted during the sovereign-debt crisis. Political uncertainty is never good for a country’s currency and in the case of the euro it has been a constant threat.
Europe and France are not doomed to austerity – according to Francois Hollande. He said in his first speech “Austerity is not an inevitability”. These type of statements are worrying investors across the globe about the prospect of the EU leaders changing their policy on how to recover from their sovereign debt crisis.
EURUSD dropped to 1.2955 during the Asian session after the elections, its lowest point since January . During the UK bank holiday the pair traded back over 1.30, currently trading at around 1.3018. A close under 1.30 will open the 2012 low of 1.2655 as a bearish target. In the meantime 1.32 looks to be the range top now.
With no clear winner in Greek elections, New Democracy leader Antonis Samaras failed to forge an agreement to form a new government. Election results raised questions about the country’s euro membership and triggered the biggest stock-market drop in six months.
Greek political uncertainty tops the headlines as risks are pointing to a likely re-election which would take place at the earliest in mid-June. A delay could threaten the current Greek bailout should it delay implementation of the necessary austerity measures.
Yesterday saw an improvement in German factory orders which rose by 2.2%, beating expectations only 0.5%.
Today, with the spotlight already firmly fixed on Europe, there will be a great deal of interest in ECB President Draghi’s speech at 1.30pm today.
Australian building Approvals and Retail Sales both rose over the weekend, seeing GBPAUD drop nearly a cent to 1.5879 from 1.5942. Australia posted its third-straight trade deficit in March as shipments of key exports such as coal and iron ore once again fell. The deficit figure reinforced the RBA decision to slash interest rates by 50 basis points last week.