Published: Thu, May 11, 2017
Money | By Armando Alvarado

Rising yields boost dollar, euro after French vote

Rising yields boost dollar, euro after French vote

The European stock markets did not seem to react too well to Emmanuel Macron's win in the French Presidential election as the German DAX and the French CAC40 both closed in the red on Monday.

The reading further strengthens prospects the Federal Reserve will stick to a planned course of two more interest rate rises this year. France's CAC 40 index closed down 0.9 per cent, while Germany's DAX fell 0.2 per cent.

German two-year government bond yields briefly rose to minus 0.64 percent, their highest level since the end of January, while benchmark 10-year Bund yields were 2 basis points higher on the day at 0.44 percent - hovering close to six-week highs hit on Monday.

In market parlance, it's a clear case of buying the rumor and selling the fact.

Macron's victory has reassured markets that France will not be following the United Kingdom out of Europe and that it will continue to play a key role within the development of the single market.

Vive la France for rejecting far-right Trumpite Marine Le Pen and everything she represents; xenophobia, ultra-nationalism, neo-fascism, anti-Semitism, and fear mongering.

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Macron's victory has therefore pushed back any fear that France was on a road that could have led to the breakup of the European Union and the euro itself. In his election manifesto he described the UK's decision to leave the European Union as a "crime" that will plunge Britain into "servitude".

The apparent French rejection of a far-right party has eased concern across Europe.

"Many on the left of French politics, particularly those people who voted for [Jean-Luc] Mélenchon, have said straight away that although they were pleased that Marine Le Pen was not elected they would robustly oppose attempts to cut the number of public servants and to bring down the debt in those proportions", Professor Cole said.

Le Pen's "France first", anti-Europe message struck a chord with great swathes of the country.

Copper prices fell 1.4 percent to four-month lows around $5,015 a tonne as Chinese trade data showed April imports of the metal dived 30 percent from a month earlier.

"Knowing all of this the new French President may well find that winning was the easy bit", said Michael Hewson, chief market analyst at CMC Markets. There are an very bad lot of people in France who are far from happy with the prospect of President Macron. Macron's political movement, recently renamed La Republique en Marche!, will be presenting candidates in all 577 constituencies but has never mounted a parliamentary campaign before. Since the establishment of the Fifth Republic in France in 1958, there have been three periods of cohabitation, most recently between 1997 and 2002. Citing her party's "historic links to white supremacy and anti-Semitism", French banks refuse to do business with it. Le Pen's father is an infamous Holocaust denier who was convicted in France for inciting anti-Semitism.

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