Full Week Ahead Preview: Here’s “What To Watch” After France Votes

Well, it’s Sunday which means French voters are going to the polls to decide whether they want to do their part to help facilitate the end of Western Democracy as we know it.

Here’s one voter who knows what she wants in that regard:

Thanks Marine. Now if only you could convince the skeptics among us that this isn’t all a show and that you aren’t simply going to revert to being your father if elected.

Well as we noted on Saturday, the ECB is preparing for the worst (although they don’t expect it) and the SNB has indicated its willingness to step into FX markets if some “adverse” outcome triggers EURCHF chaos.

So far:

Macron 24% and Le Pen 22% so far, with 4 hours to go, according to Belgian TV exit polls in France. https://t.co/wim8RxGvnT

— Yaroslav Trofimov (@yarotrof) April 23, 2017

Although the French election isn’t the only possible market moving event for the trading week that will be, “it’s hard to see it as a non-event in the short- or medium-term,” Bloomberg’s Richard Breslow writes in his week ahead preview excerpted below.

Via Bloomberg

It was the kind of week where China released a set of really good numbers, including retail sales, industrial production and GDP and the Shanghai Composite sold off over 2%. Perhaps understandable in a world where the major economic debate currently trending is whether “hard” or “soft” data is what we should be paying attention to.

• To add insult to injury, as Goldman Sachs shows, sentiment improvement and whether you voted for Donald Trump are highly correlated
• The U.K. unexpectedly decided to call a snap election and the pound soared. Lots of currency forecasters rushed to pull their conviction bearish calls. Showing once again the risks of thinking it’s possible to call the path of a financial asset two years in advance
• Meanwhile, back in the real world, U.K. retail sales were a bad miss and Tuesday’s spike into the sell zone now looking frustratingly far away
• Despite some weak recent data out of the U.S., Fed Vice Chairman Fischer stood by his upbeat view of the economy. Indications are the Committee may well be planning to look through the first quarter soft- patch which seems to become a recurring pattern. Futures pricing for a June hike tanked on Tuesday and have been rising ever since. U.S. first quarter GDP due on Friday may set the tone
• Up ahead, we get the first round of the French presidential election, ECB and BOJ meetings and find out if the U.S. can avoid a government shut-down by passing its spending bill.

WHAT TO WATCH

• How often can you say Sunday may be the biggest market- moving day of the week?
• The French election will be foremost on everyone’s mind. We’ve heard comment running the gamut from “everyone is petrified” to “should be a happy time for risk.” We’ll wait and see. Any way you slice it, it’s hard to see it as a non-event in the short- or medium-term.
• On Tuesday, we begin the set of two, five and seven-year U.S. Treasury auctions. Given the recent strong rally in the belly of the curve, it’s not a good idea to ignore them. It may be the answer on whether the 2-year is badly mispriced or sending an important message.
• Wednesday brings CPI in Australia. A beat could let the RBA upgrade its inflation forecasts. There hasn’t been any inflation pressure, but there are signs wages may be starting to move up. Governor Lowe also remains concerned with the financial risks from the housing market. The currency tried to break below 0.7500 this past week and held. Nice pivot to watch.
• U.K. PM May will be hosting EC President Juncker and EU Brexit negotiator Barnier ahead of the start of Brexit negotiations. The market spent this week betting on signs of a “softer” Brexit. All comments and body language will be parsed.
• On Thursday both the BOJ and ECB will promise an increasingly skeptical audience that they are set to stay the QE course as long as it takes to reach their objectives. Listeners will be looking for any chink in the armor of that narrative.
• Friday’s U.S. GDP report should be weak, but will probably have to be shockingly so to derail the Fed’s inner circle from their current rate-path messaging. First quarters are now routinely granted a Mulligan.
• The U.S. needs to pass a spending bill to avoid what would be an embarrassing shutdown. Further proof of gridlock. They’ll eventually get there, but watch for grandstanding and posturing which could delay the process through the weekend, or longer. The longer the delay, the worse the implications.