France heads to the polls

Europe’s next political showdown of 2017 comes this Sunday, with a first round of voting in France in which voters will select the two candidates who will then face each other in the run-off for the presidency on 7 May. 


This Sunday, a total of 11 candidates will appear on the ballot. The candidates most likely to move on to the second round are:

  • Emmanuel Macron (former minister of the economy, pro-Europe, independent, political centre)
  • Marine Le Pen (anti-Europe, anti-immigration, politically far-right)
  • François Fillon (originally the favourite in these elections, but was tripped up by a scandal involving payments to his wife; political centre)
  • Jean-Luc Mélenchon (wants to renegotiate EU treaties and has threatened to withdraw; 100-billion euro investment program; politically far-left)

In polls for the first round, Macron is at 24.0%, ahead of Le Pen at 22.5%, Fillon at 19.5% and Mélenchon at 18.5%. For this Sunday’s election results, I have analysed four possible scenarios:

  1. Macron vs. Le Pen

This appears to be the most likely alternative at present, and it’s also the pairing that is currently priced into the market. In this case, the EUR/USD rate should continue to vary within a trading range of 1.05 – 1.09. Any significant divergence in the final vote tally from the pre-vote prognoses would be a cause for surprise. If Le Pen performs more strongly than predicted, this could put pressure on the euro, since it might mean that Le Pen would be more likely to win in the second round. The result could be a test of support at 1.05 EUR/USD. If Macron finishes with a clear lead, the opposite could occur, thus boosting the euro.

  1. Macron vs. Fillon

The most market-friendly scenario, since both favour moderate and pro-European policies. With this combination going into the second round, we could see a recovery in the EUR/USD rate to 1.1100 EUR/USD.

  1. Le Pen vs. Mélenchon

The worst result for markets. Both have threatened to leave the EU and drop the euro. The result would be a sharper depreciation of the euro. The EUR/USD rate could very possibly approach parity over the course of the year.

  1. Le Pen vs. Fillon

This scenario would have similar implications to the “Macron vs. Le Pen” scenario. Polls also put Fillon ahead of Le Pen for the second round.

The market will be watching very closely to see whether the polling agencies are right this time. Our guaranteed stops are available to safeguard against any unpleasant surprises. 

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