he scenario that we had pencilled in as the most likely, a runoff between centrist Macron and far-right Le Pen , has indeed come to pass. After the major surprises of Brexit and the US election, the fact that the consensus turned out to be correct is in itself notable.

These results appear to guarantee that Macron will be the next French President. All polls agree that the gap between Macron and Le Pen is enormous, averaging near 30 points. As we know polls can make two or three point mistakes, a 30 point lead seems insurmountable.

Markets in early Asia trading are responding with a large jump in the Euro and relief rallies for risk assets everywhere. As this is written, the Euro is up a bit under 2% to the highest levels of 2017. The price action over the next few days will be key to establish the trend for 2017.

Next week markets should take a breather from European political worries. Instead we expect to see renewed focus on US politics. Trump has promised a major announcement on tax policy on Wednesday, and a spending agreement is needed by Friday to avoid a Federal Government shutdown. UK GDP data will be out on Friday, the ECB’s meeting on Thursday, and a meeting of the Bank of Japan this week are likely to prove crucial for their respective currencies.

Major currencies in detail

GBP

The Pound was buoyed by prime Minister May’s announcement of a snap general election. Sterling had a scorching week, beating out every other major currency and managing a 2% rally against the US Dollar, putting cable within view of 1.30. Clearly the market is happy about the prospects of a enlarged Conservative majority, on the theory that it will facilitate Brexit negotiations. The rather poor retail sales data out on Friday did little to dampen market enthusiasm, though admittedly it is a volatile number that is subject to large revisions.

Attention now shifts to first-quarter GDP data out on Friday. Consensus is for a 0.4% quarter on quarter print, which would leave yearly growth around 2%. Risks may be skewed somewhat to the downside given the soft consumer and services data we have seen recently.

EUR

The fallout from the French Presidential elections will dominate at least the early part of the week. However, with Macron all but certain to be elected President, the focus should shift soon back to macroeconomic data and ECB officials views on the timing of rate hikes and exit from QE. Last week, PMI indices of business activity rose to a fresh cycle high. This, combined with the easing of short-term political risks, means markets will pay very close attention to the substance and tone of ECB communications at the central bank meeting on Thursday.

USD

Mixed and relatively unimportant macroeconomic data last week out of the US meant that US rates traded sideways and so did the US dollar, which ended the week largely unchanged in trade-weighted terms.

In addition to the busy political calendar mentioned above, next week focus will be on durable goods orders out on Thursday and GDP growth on Friday. We look to both numbers to provide a read on whether the apparent slowdown in the first quarter was real or an artefact of seasonal impacts.