A sharp appreciation for the Euro has followed the outcome of the first round of voting for the French Presidential Election. This has led the Euro to rise from 1.16 to 1.19 against the Japanese Yen, the best exchange rate since late March.
Emmanuel Macron, a centrist candidate, has reached the final two as predicted. Less supportively, however, his opponent is far-right contender Marine Le Pen. Le Pen’s policies are considered isolationist and extreme, covering heavy immigration restrictions and plans to pull away from the EU and Euro.
The recent spike in Euro demand shows that traders are hoping for a landslide Macron victory, but voters remain divided on the issue of Europe so the situation is still ‘all to play for’.
The second and final round of voting is on May 7th. If Macron takes victory, then the Euro is expected to rally once again, while a Le Pen triumph is likely to bring major Euro to Yen losses.
Ahead of that time, the Euro could be weakened by April’s Eurozone confidence data on April 27th. Forecasts are for a slight dip in business confidence, but significantly worse-than-expected results may drag the EUR JPY exchange rate down.
Yen Losses Come as Safe Haven Demand Drops
Japanese domestic data has been low-impact today, making the Euro the actual cause of recent Yen losses.
With the Euro dominating currency trading today, demand for safe haven currencies like the Yen has fallen considerably.
Economic developments out of Japan have seen plans to resurrect the Trans-Pacific Partnership (TPP), a trade deal previously considered dead in the water due to US withdrawal.
Although Japanese officials were previously wary of the deal, it appears trade ministers have seen a golden opportunity for the Japanese economy.
Commenting on the shift of policy, Finance Minister Taro Aso stated;
‘We will start talks on an eleven member TPP, minus the US, at the Asia-Pacific Economic Cooperation meeting in May’.
For the remainder of the week and the month, Japanese data will consist of the Bank of Japan (BoJ) interest rate decision on Thursday and March inflation and unemployment on Friday.
The BoJ is expected to leave interest rates untouched at -0.1%, while annual inflation has a reprint at 0.3% predicted.
If Japanese unemployment rises as forecast on Friday, the Yen may fall against the Euro.