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French election 2017

After winning the presidency last month, Emmanuel Macron now has a parliamentary majority in his sights. Find out how key markets like EUR/USD, gold and the DAX might be impacted.

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Why does it matter to traders?

For the first time in modern political history, the French presidential election second round featured no candidates from either mainstream party. And it was a campaign between two complete opposites: Le Pen a far-right radical with a disdainful view of the European Union (EU) and the immigration it brings, and Macron an established liberal who believes that the best future for France lies at the heart of a stronger EU.

The markets clearly preferred Macron in both stages of the election, with a major market rally following his first-round victory. Many will view the main takeaway of this second round runoff as Le Pen’s loss — but in Macron France has elected a leader who has promised deep reforms that will have a major impact on the markets.

Key markets to watch

Markets Bid Offer Updated Change
EUR/USD
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EUR/GBP
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France 40
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Germany 30
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AXA SA
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BNP Paribas SA
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Societe Generale SA
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Total SA
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Prices above are subject to our website terms and conditions. Prices are indicative only.

What happens now?

Macron’s victory was officially confirmed on 11 May. His inauguration took place shortly after, on 14 May.

After a strong performance in the first round of legislative elections on 11 June, attention now turns to the second round on 18 June. Macron’s En Marche! (EN) party looks set for a landslide victory, which should make implementing his many reforms easier — but after voter turnout in the first round hit record lows, he will be hoping for more in the next round.

What might Macron mean for the markets?

Much was made of Macron’s supposed ‘outsider’ status ahead of this election, but when it came to the two-candidate run-off, markets saw the rookie’s victory as all but certain. This meant it was, ultimately, an unremarkable day for the euro. 

But traders of EUR/GBP and EUR/USD know it’s not time to nail colours to the mast just yet. There are still legislative elections to take place in June, whose outcome will have a major influence on Macron’s ability to implement policy. And up to now, the political upstart has been vague about how those policies will be funded exactly, citing €60 billion that will come from ‘increased employment’ and ‘greater efficiency’. While a crisis may have been averted with Le Pen’s loss, market enthusiasm for Macron’s tenure remains dampened.

Still, there are reasons to be cautiously optimistic for the future. While his win does mark a move away from the relative predictability of traditional party politics, Macron’s past roles as minister of economy in the previous socialist government and investment banker at Rothschild gives us some idea of what to expect. If successfully introduced, his policy reforms - which include overhauling the pension programme, cutting corporation tax and investing €50 billion in public spending - could jolt France’s economy back to life. Keep a close eye on the France 40, which will prove a more domestically-focused barometer for how his intentions are panning out.

Macron’s policy on Europe, meanwhile, is clear: he’s committed to keeping France at the heart of the EU. With that question out of the way, all we need to ask ourselves is what France’s new leadership will mean for Brexit negotiations. Macron has promised to stand in the way of a deal that gives Britain preferential treatment after it leaves the bloc, and this could certainly cast further shadow over sterling as talks finally get underway.

Read more on what's next for the markets

Much was made of Macron’s supposed ‘outsider’ status ahead of this election, but when it came to the two-candidate run-off, markets saw the rookie’s victory as all but certain. This meant it was, ultimately, an unremarkable day for the euro. 

But traders of EUR/GBP and EUR/USD know it’s not time to nail colours to the mast just yet. There are still legislative elections to take place in June, whose outcome will have a major influence on Macron’s ability to implement policy. And up to now, the political upstart has been vague about how those policies will be funded exactly, citing €60 billion that will come from ‘increased employment’ and ‘greater efficiency’. While a crisis may have been averted with Le Pen’s loss, market enthusiasm for Macron’s tenure remains dampened.

Still, there are reasons to be cautiously optimistic for the future. While his win does mark a move away from the relative predictability of traditional party politics, Macron’s past roles as minister of economy in the previous socialist government and investment banker at Rothschild gives us some idea of what to expect. If successfully introduced, his policy reforms - which include overhauling the pension programme, cutting corporation tax and investing €50 billion in public spending - could jolt France’s economy back to life. Keep a close eye on the France 40, which will prove a more domestically-focused barometer for how his intentions are panning out.

Macron’s policy on Europe, meanwhile, is clear: he’s committed to keeping France at the heart of the EU. With that question out of the way, all we need to ask ourselves is what France’s new leadership will mean for Brexit negotiations. Macron has promised to stand in the way of a deal that gives Britain preferential treatment after it leaves the bloc, and this could certainly cast further shadow over sterling as talks finally get underway.

Read more on what's next for the markets

 

Is ‘Frexit’ on the cards?

In short, no. In Macron, France has elected a leader who has made it clear that he has no plans to undermine the EU or eurozone.

And in truth, Le Pen would have found Frexit a hard goal to pursue, even if she had beaten Macron.

Her 144 ‘commitments’ to the French people included a promise to take France out of the European Monetary Union (EMU), but only to hold a referendum on EU membership if the union refused to comply with her proposed reforms. And even if she did decide to hold a referendum, she couldn’t have done so without parliament’s approval — which would have required a very strong performance for the anti-EU FN party in June’s legislative elections.

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CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.