French presidential
debate lifts euro to six-week highs
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[March 21, 2017]
By Dhara Ranasinghe
LONDON (Reuters) - The euro climbed to six-week highs and sentiment
toward French assets was lifted on Tuesday after centrist Emmanuel
Macron's performance in a television debate boosted a view he would win
France's presidential race over the far-right's Marine Le Pen.
The dollar was also held back by doubts about how fast U.S. interest
rates would rise. Oil prices rallied on talk that OPEC could extend
supply cuts.
European stock markets were broadly firmer, with the exception of
London's blue-chip stock index which turned negative after
stronger-than-expected British inflation data boosted the value of
sterling.
U.S. stock index futures traded higher, pointing to a positive start on
Wall Street ahead of speeches by a host of Federal Reserve officials. In
Asia, MSCI's broadest index of Asia-Pacific shares outside Japan hit
21-month highs, supported by signs of strong global growth.
France's turbulent presidential campaign remained in focus for global
investors, who have been concerned about the potential for a populist
backlash following last year's surprise votes for Brexit in Britain and
for Trump in the United States.
A Harris Interactive poll on Tuesday showed that centrist Macron had
been the most convincing candidate in Monday's first French TV
presidential debate, adding weight to two other polls that reached a
similar conclusion.
The debate, and two others that will follow before the April 23 first
round, are considered crucial for an election in which nearly 40 percent
of voters say they are not sure who to back.
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"From the point of view of international investors, this is a positive
as it keeps France's position in the euro zone secure, or at least not
weaker," said DZ Bank analyst Rene Albrecht.
Macron's presidential bid gathered pace on Tuesday after a junior
minister said she would back his campaign, becoming the first member of
the government to do so.
The prospect of anti-euro, far-right candidate Le Pen delivering a
surprise election win has rattled French bond markets this year.
But on Tuesday the premium investors demand for holding French 10-year
government bonds over German ones <FR10YT=TWEB> <DE10YT=TWEB> narrowed
to as much as 63 basis points from Monday's 68 bps, a near-two-week
high.
Safe-haven German Bunds sold off as French election jitters ebbed.
French banks such as BNP Paribas <BNPP.PA> and Societe Generale <SOGN.PA>
- bellwethers of sentiment in France - were among the top gainers on
France's benchmark stock index <.FCHI>.
The euro topped $1.08 <EUR=> to reach its highest level in about six
weeks.
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![](../images/032117pics/busine9.jpg)
Candidates for the 2017 presidential election Francois Fillon (R),
former French Prime Minister, member of the Republicans and
candidate of the French centre-right and Emmanuel Macron, head of
the political movement En Marche !, or Onwards !, shake hands before
a debate organised by French private TV channel TF1 in Aubervilliers,
outside Paris, France, March 20, 2017. REUTERS/Patrick Kovarik/Pool
![](http://archives.lincolndailynews.com/2017/Mar/21/images/ads/current/peasley%20lda%20080907.png)
"The euro has been helped by Macron's performance, definitely," said
Stephen Gallo, head of European FX strategy at Bank of Montreal in
London.
SOFTER DOLLAR
After four days of trading focused chiefly on expectations for U.S.
interest rates and the Trump administration's attitude to trade and a
stronger dollar, the euro's gains also sent the dollar index to a
six-week low below 100 <.DXY>.
Sterling rose almost 1 percent to a three-week high of $1.2474 <GBP=D4>
after stronger-than-expected inflation numbers that took the rate of
prices past the Bank of England's 2 percent target.
With the data potentially adding to uneasiness among central bank
officials about keeping rates near zero, British gilt yields rose
sharply, contributing to a broader sell-off in bond markets.
Attention was also turning to a spate of U.S. Fed speakers lined up for
Tuesday.
Bank of Kansas City President Esther George and Cleveland Fed chief
Loretta Mester are scheduled to speak, while Boston Fed head Eric
Rosengren will release the text of his speech.
On Monday, Chicago Federal Reserve President Charles Evans said that two
more interest rate hikes this year were likely, disappointing investors
who had anticipated rates would be increased more quickly.
Elsewhere, oil prices rallied on expectations that an OPEC-led
production cut to prop up the market could be extended.
Prices for front-month Brent crude futures, the international benchmark
for oil, gained 0.6 percent to $51.91 per barrel. But the rise was
pegged back by concerns about persistently high crude inventories.
(Additional reporting by Abhinav Ramnarayan in London and Hideyuki Sano
in Tokyo, editing by Ed Osmond)
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