"The instinctive reaction of markets to a more isolationist/protectionist world is to favour the currencies of countries with large current account surpluses, as these are the winners if capital stays at home. That may be too simplistic, but the yen and Euro are natural initial winners. FX positions are much less stretched than bond ones but a further final flush of Euro and Yen shorts is a risk here.

The first round of the French Socialist Primaries shows a clear shift to the left, with Benoit Hamon gaining most votes and heading into the second round with Manuel Valls this weekend. A Hamon win would leave a big gap in the centre ground, to the benefit of Emmanuel Macron. In many ways, it is easier for a centrist candidate to galvanise cross-party support in the Presidential election and so, this result may well be seen in FX=-terms as Euro-friendly. There are far too many twists and turns ahead in this election us to alter a view that at some point, political nerves will drag the euro down but today or tomorrow we may well see a break back above EUR/USD 1.08".

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