Morning brief for April 25

Safe-haven assets, including the yen and gold, are still under pressure as investors whet their appetites for the riskier assets after centrist Macron qualified for the May 7 runoff alongside far-right nationalist Marine Le Pen. While polls show, Macron winning the May 7 contest by 20-30% points, the risk for Macron that voters will be turned off is still in place especially after his and his supporters’ drinking spree at La Rotonde resto. It was a huge mistake to make ahead of the second round of the election, according to Thomas Guenole, professor politics at the Sciences Po institute. “Macron needed to show himself as a real statesman and instead he comes across as a child king,” the academic said.

EUR/USD was trading a bit lower at 1.0870 after jumping to as high as 1.0935 on Monday. There is a room for a further upside towards the psychological level at 1.1000.

While markets are still lingering in the glow of relief after the French election in the first half of this week, the second one will likely put Donald Trump in the forefront. The US President is poised to unveil his tax reform plan on Wednesday that should be a significant driver for the markets. Also, the administration flagged that it is ready to fight desperately for its planned Mexican border wall. It seems that Trump’s team is straining to demonstrate progress achieved on key campaign promises like money for a border wall, increased military spending, cut tax. But any of these measures require bipartisan support, and Democrats refuse to budge raising the prospects for a shutdown.

Today may take the heat off as there should be a very light day for economic data. North Koreans may make some waves though as they might test an intercontinental ballistic missile or nuclear device today celebrating the 85th anniversary of the Korean People’s Army.

The Canadian dollar was the biggest loser of Tokyo session. It fell after the US announced new duties averaging 20% on Canadian softwood lumber imports. USD/CAD spiked to the highest level (1.3560) last seen in December 2016. On the upside, there is a sturdy resistance at 1.3600.

Australia and New Zealand are closed for the Anzac Day holiday.

Aussie edged down to 0.7550 after hitting 0.7570 on Monday. AUD/USD will likely be trading sideways in the upcoming sessions having moved into a consolidation phase. On the downside, we see several supports at 0.7520, 0.7430 (the lower border of consolidation range). If there is a rebound, the prices might face a hurdle at 0.7610 (the upper border of the range). Tomorrow’s focus will be on the Australian CPI figures which are expected to confirm that the pronounced pulse of inflation in Australia is still weak. This might become a drag for AUD.

USD/JPY is hovering around 110.10 level. The technical outlook for the pair is neutral despite the salient surge seen on Monday. A daily closing above 110.60 would open the way towards 111.55. In the early trading hours, we heard some interesting comments from deputy governor of the Bank of Japan Iwata, saying the BoJ is conducting simulations on the exit strategy, but not willing to disclose the facts to the press.

In commodities markets, oil prices traded higher to almost $52.30, although gains were capped by fears that the OPEC members might fail to extend output cuts beyond June 30, as Russia claimed that it will lift output if the deal on curbs lapses.