The Euro Australian Dollar (EUR AUD) exchange rate tumbled by around half a cent this morning as markets remain worried about the prospect of Marine Le Pen causing an upset in the upcoming French elections.
The decline follows the start of the official campaign period as France’s Constitutional Council announced the list of 11 candidates who will be running in this year’s election on Saturday.
Recent polls suggest that Le Pen is only 0.5% behind independent candidate and current front-runner Emmanuel Macron in the first round, with the Odoxa poll suggesting that they will gain 26% and 26.5% of the vote respectively.
However the poll also suggests that Macron will comfortably beat her in the second round, claiming 64% of votes to Le Pen’s 36%.
Observers see Le Pen’s National Front party as a major threat to the stability of the Eurozone as it campaigns on pledges to hold a referendum on EU membership and improve national security.
Le Pen’s focus on security continues to resonate with the French electorate, especially following the recent foiled attack in a Paris airport, where soldiers were forced to shoot dead a man after he attempted to seize a rifle as he reportedly proclaimed that he wished ‘to die for Allah’.
While the defeat of Geert Wilders in the Dutch elections has gone some way to reassuring markets that the European electorate is not as amenable to populist politics as initially feared, EUR investors are still likely to remain reluctant to rule her out of the running after the upset of both Brexit and Trump last year.
However, the Euro was able to claw back some losses this morning following the release of upbeat data from the Eurozone.
The latest German Producer Price Index rose at its fastest pace in over five-years as it surged from 2.4% to 3.1% year-on-year in February, although it fell slightly short of an expected rise to 3.2%.
The single currency was also buoyed by positive wage figures from the Eurozone as average Wage Growth across the bloc continued improving late last year, climbing from 1.5% to 1.6% in the fourth quarter.
Meanwhile the Australian Dollar was strengthened this morning by House Price figures released by CoreLogic, which predicts that Australian house prices will continue surging in the capital cities.
The group forecasts that prices will rise 12.7% over 2017, having already climbed by 3.6% to date, with the largest growth expected to be seen in Sydney – where prices are expected to shoot up by 18.9% by the end of the year.
Economists predict that the blistering pace of price rises may force the Revere Bank of Australia (RBA) to tighten monetary policy earlier than expected as most first time buyers are being priced out of the property market.
This will likely be reflected in the fourth quarter Australian House Price Index as analysts predict it will have rocketed from 1.5% to 2.4% late last year, with the ‘Aussie’ likely to strengthen when the data is released tomorrow.
Meanwhile the Euro may suffer further losses on Tuesday as Spain’s Trade Balance data is expected to show that the Spanish trade deficit rose at the start of the year.
EUR investors are also likely to become increasingly dovish this week as the Eurogroup returns to discussions on a potential fourth bailout for Greece, with talks likely to be marred by the disappointing Q4 GDP figures from the beleaguered nation.
Current Interbank Exchange Rates
At the time of writing the EUR AUD exchange rate was trending around 1.39 and the AUD EUR exchange rate was trending around 0.71.
