Euro dips below $1.07 on French election run-in

The euro fell back yesterday, trading almost a cent off this week’s highs as investors prepared for the first round tomorrow of a tight French presidential election race. Traders said an upbeat flash Purchasing Managers’ Index survey from France and polls showing centrist Emmanuel Macron still in pole position ahead of the vote had helped settle nerves after a dip late on Thursday. There was no obvious reaction to the shooting of a French policeman in central Paris overnight, an attack claimed by Islamic State.

But with options markets suggesting investors are extremely concerned about the chances of strong results for far-right and far-left candidates Marine Le Pen and JeanLuc Melenchon, the euro fell 0.2 percent against the dollar in morning trade in Europe. “I think everybody is locked down,” said Simon Derrick, head of the global markets research team at Bank of New York Mellon in London. “It is kind of reminiscent of the big events last year where people know that it is a binary outcome so the best approach is to remain as cautious as possible.” Other major currency pairs were stuck in tight ranges, with Britain’s weakest quarterly retail sales number in five years doing minimal damage to sterling after a 4-cent surge earlier this week.

The numbers provided further evidence of a weakening of the consumer demand that has propped up economic growth since the Brexit vote last June. But they come at a time when investors seem optimistic about Prime Minister Theresa May’s shock decision to call an early general election for June 8. “We used to think that when the going got tough, the Brits went shopping, but this retail environment is too much for the hardy British consumer,” said Jeremy Cook, an analyst with corporate and retail currencies provider World First. — Reuters