President Recep Tayyip Erdgoan won a narrow referendum on Sunday giving him new constitutional power. European diplomats expect Erdogan to consolidate his new executive powers by picking political battles with the EU. Fears are growing that the increasingly authoritarian leader will abandon EU membership ambitions by dropping judicial and democratic reforms and issuing an ultimatum on visa-free travel for Turks.
Fears that the Turkish government will allow a new refugee crisis if the EU fails to honour its promise and a new ultimatum is expected imminently. Turkey agreed to stop migrants travelling to Greece, a gateway to Europe, and to take back refugees who were held there.
Just hours after the vote, Erdogan, who now has the right to overrule his own parliament, indicated his willingness to restore the death penalty. Such a move would automatically end talks about visas and Jean-Claude Juncker has said that the issue is a “red line” for the EU. A resurgence of the migrant crisis would boost chances of populist candidates in upcoming French and German elections and has already caused a weakness in the Euro.
As the French election enters its final stretch ahead of voting on April 23rd, the polls are still wide open with a third of voters yet to decide. The race is the most unpredictable the country has seen in recent history, with two of the four candidates also hostile to the European Union. The result of the second round of voting in two weeks will have far-reaching implications not just for France but for the region as a whole.
Going into the final week of campaigning, the latest polls have the 4 favourites closely ranked with Macron on 24%, Le Pen 23%, Fillon 21% and Melenchon 18%.Whenmargin of error is taken into consideration, this puts them all on a very level pegging.
In Asia, North Korea has threatened weekly missile tests despite the posturing of the US administration. US vice president, Mike Pence, visited the DMZ between North and South Korea and warned North Korea not to test President Trumps resolve. “Just in the past two weeks, the world witnessed the strength and resolve of our new president in actions taken in Syria and Afghanistan,” said Mr Pence. “North Korea would do well not to test his resolve or the strength of the armed forces of the United States in this region.”
North Korea’s Ambassador to the UN spoke at a press conference stating that the US was “disturbing global peace and stability and insisting on gangster-like logic.” Dangerous language against a new President who is still feeling the bruises from his defeat in Congress of his Health Bill repeal.
EUR/USD edged above $1.0650 overnight but with no follow-through and is currently a few pips under the level. The single currency is unlikely to gain any real traction this week given the uncertainty over the upcoming French elections. Today focus is on the North American agenda, in the absence of economic news from Europe. From a technical view, the April 5th high at $1.0689 and March 31st high at $1.0702 may offer resistance while we look for support at yesterday’s low at $1.0600 and the April 11th low at $1.0577.
Cable traded in a tight range overnight before moving back towards three-week tops near $1.2600 hit yesterday as European traders returned after the Easter holidays. No UK data on tap, with focus on US Housing Starts, Building Permits and Industrial Production data. From a technical view, the March 27th high at $1.2615 may offer resistance ahead of the February 2nd high at $1.2707. On the downside, yesterday’s low at $1.2522 and Thursday low at $1.2496 are in focus.
USD/JPY edged above ¥109.20 in early Tokyo but has since slipped back under ¥109.00, with economic dialogue between the US and Japan along with lingering worries about North Korea and the French presidential elections likely keep the Yen elevated against the Buck. From a technical view, we look for support at low of ¥108.11 ahead of the November 11th intraday high at ¥106.90. On the upside, Thursday’s high at ¥109.39 and Wednesday’s high at ¥109.86 are in focus.
GBP/EUR is on the front foot this morning, with the GBP/USD major seen through $1.2600 amid a lack of any negative Brexit related headlines, but the House of Commons is returning from its recess today. Euro bulls meanwhile remain cautious amid concerns surrounding the French presidential election. From a technical view, the February 24th high at €1.1872 and the February 22nd high at €1.1900 may offer resistance. On the downside, today’s low at €1.1789 and yesterday’s low at €1.1776 may provide support.