Groundhog Day

Hello and welcome back. At 6.50pm yesterday evening I was struck with a strange sense of deja vu. The England football team were heading for an embarrassing exit from a major competition, whilst a political event was occuring in Europe of the scale not witnessed for many years. It was almost like we were back 8 years ago in 2016 when England lost to Iceland in Euro 2016, with the UK having voted to leave the EU only four days earlier. Yet, this time the protaganist’s were Jude Bellingham (who was 12 when the UK voted to leave the EU by the EU!) and Marine Le Pen in France, both of whom appear to be steering this series of events to a slightly different outcome.

Unless you’ve been under a rock since last night you will know the England football team somehow managed to survive against Slovakia and progress, whilst Marine Le Pen’s National Rally party look set to win the first round of the French election with approximately 34% of the votes. It’s important to note at the time of writing we’re only going to by exit polls and the voting attendance has been high. So far, the euro has performed well in Asian trading and the London open, dropping down to 1.1770. With Le Pen’s right wing party leading, the left wing alliance named the Popular Front are second with around 29% of the vote and astonishingly Macron’s centrist party is currently 3rd. All three will go through to the second round next weekend. From here expect to see further scrutiny of fiscal responsibility to enact policies and will monitor the general reaction of the public in France with some reports of disturbance overnight in cities across the country.

The drama from the UK doesn’t stop with Jude Bellingham and next is the turn of Keir Starmer, which currently feels like it could be more of a procession than a contest according to Labour’s lead in the polls.

Thursday is when the country will cast their votes and guarding any last minute shocks we would expect the pound to at least retain it’s current value amidst a decent dallop of optimism toward a new government in the UK, elected in a seemingly orderly fashion. It appears the key late battleground remaining will be efforts to avoid a super majority for the Labour party and there still remains a very small chance of a surprise with reportedly up to 15% of voters ‘undecided’.

The week ahead is littered with risk. The fall-out from the French election will continue with plenty of risk of political dead-lock or fragmentation which markets could express their distaste too in French bond markets later in the week (although more likely early next week). Aside from the UK election on Thursday with results likely very early on Friday morning, we have some core economic news due from across the Atlantic. The dollar has marginally weakened in the last couple of sessions and the next round of tests for the Greenback will come later in the week in the shape of JOLTS and Non-farm payrolls and the cycle of assessing the economic data to predict the Fed’s next move. Also watch out for ISM Services release from the US as this piece of data last month was a key part of the dialogue in the latest shape of the US economy.

Current rates and technical levels

Economic events

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Thank you for reading! We'll be back next week with another edition. This edition of Birchstone's Weekly View was written by Lewis Thorn .