Sterling attracted a school of sellers during early trading on Friday, following the disappointing 1.8% decline in UK retail sales in March that rekindled fears of Brexit impacting the UK economy. UK retail sales posted their largest quarterly fall in seven years in the first quarter of 2017, as accelerating prices and a Brexit-fueled Sterling selloff pressured consumers. With wage growth lagging behind inflation, concerns may continue to heighten over the longevity of the UK’s prized consumer-driven economic growth. The Pound remains gripped by the Brexit developments as they continue moving forward and heightened political uncertainty created from the snap general election shocker should limit extreme upside gains.
From a technical standpoint, although the sustainability of the Sterling rebound can be questioned, the British pound/U.S. dollar (GBP/USD) currency pair remains undeniably bullish on the daily timeframe. The decisive breakout above 1.2775 could encourage a further incline higher towards 1.3000. On the other hand, if the bearish Brexit fundamentals inspire sellers, then repeated weakness below 1.2775 could open a path lower back towards 1.2600.
French presidential election countdown begins
The French presidential elections remain a major event risk that has the ability to send serious shockwaves across the financial markets. With recent polls indicating a fierce battle between the four candidates in the first round and millions of voters still undecided, uncertainty remains the name of the game. Although Emmanuel Macron has been labeled as favorite to become the next French President, an unexpected Marine Le Pen victory could deal a symbolic blow to the unity of the European Union and ultimately create a tidal wave of risk aversion. Investors should remain diligent as we enter the weekend, and be prepared to expect the unexpected when dealing with the elections’ repercussions on the euro.
From a technical standpoint, the euro/U.S. dollar (EUR/USD) currency pair has struggled to close above the 1.0750 level, with pre-election jitters exposing the euro to downside risks. If anxiety continues to heighten, then euro bears may be inspired to send prices lower towards 1.06850 or lower.
Commodity spotlight – Gold
Jitters surrounding the forthcoming French presidential elections and the ongoing tensions engulfing North Korea have supported gold this week, with prices balancing around $1,280 as of writing. Risk aversion remains rife amid the political risk, with uncertainty accelerating the flight to safe haven investments. Bulls remain in control on the daily charts and the decreased probability of a U.S. interest rate increase in June could provide a foundation for buyers to attack. If the mounting concerns over Trump’s ability to push through with fiscal spending continue to pressure the Dollar further, then gold may target $1,300 and potentially higher. Much attention will also be directed towards the French elections this weekend and could spark a wave of risk aversion if the results of the first round rekindle Frexit concerns. From a technical standpoint, gold bulls remain in control above $1,260, with $1,300 acting as the next key level of interest.