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Euro barely blinks on election results


27 May 2019

The Euro has opened the new trading week marginally higher against the Greenback following initial results from the Parliamentary elections in Europe, suggesting that the mainstream have managed to hold ground against the feared outcome of another populist wave in the European Union. Provisional results indicate some narrowing of support for populist and Euro-sceptic parties and this suggests that momentum for the anti-establishment is relatively constrained, at least for now, meaning the Eurodollar should find some initial support from hopes of policy continuity in Europe.

These European Parliamentary election results do not suggest a near-term shock is awaiting for Eurozone politics, highlighting that the direction of the Euro over the longer-run will be determined by global forces, such as what happens next in the narrative with the US-China trade outlook.

President Trump visit to Japan not a warning shot of US-Japan trade tensions to come

As United States President Donald Trump continues his four-day visit to Japan the theme of what happens next with the global trade outlook is very much the question that remains on the mind of global investors.

President Trump’s tour has of course been followed closely by the shadow around what could be next to come in the global trade outlook, but the meetings between the United States President and Japanese Prime Minister Shinzo Abe do not suggest that there will be a sudden shift in market anxiety to a US-Japan trade breakout quite yet.

China warns not to short the Yuan!

The offshore Chinese Yuan managed to climb briefly below the 6.90 level for the first time since May 15 after a stark warning from the head of China’s banking and insurance regulator that those who short the Yuan will “inevitably suffer a huge loss”.  This has been broadly digested as a warning shot for investors that even following the escalation in the tit-for-tat tariffs this month that China has not changed its view on allowing the offshore Yuan to weaken in defence of more tariffs.

Seven overall remains the magic number in the USDCNH and the comments made by the head of China’s banking and insurance provide guidance that Chinese authorities will not hesitate to intervene in the FX markets should they feel the need to do so.

This is not only seen as Yuan-positive but also expected to come to the aid of currencies throughout the Asian region that have needed to contend with unexpected downside risks this month following the downside pressure in the Yuan. This warning from China presents just as positive a wave of momentum for the likes of the Malaysian Ringgit, Indonesian Rupiah and Singapore Dollar as it does for the Chinese Yuan.

South African President Ramaphosa vows “new era” at inauguration

The European Parliamentary elections and United States President Trump visit to Japan are not the only political events to have taken place over the weekend, with Cyril Ramaphosa declaring his intention to bring “hope and renewal” to South Africa in his inauguration speech as President of South Africa. 

Since Mr Ramaphosa took charge of South Africa close to a year ago from Jacob Zuma he has been under the spotlight to improve a South African economy that has underwhelmed for years, and continues to lag behind the progress emerging markets in other areas of the world have made in the past decade.    


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