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French election 2017

Results are in, with Marine Le Pen and Emmanuel Macron set to contest the second round of the French presidential election on 7 May. Find out what that means for key markets like EUR/USD, gold and the DAX, and open an account to take a position.

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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.

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What happens now?

Macron’s victory will be officially confirmed on 11 May. His inauguration will take place shortly after, no later than 14 May.

Attention now turns to the legislative elections on 11 and 18 June. Without a majority in parliament, Macron will find it difficult to implement his many reforms — and without the backing of a major political party, he may have to rely on centrist MPs from outside his En Marche! (EN) party to make up the numbers if he falls short.

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 July, 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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Take a position on the impact of key elections, with EUR/USD from just 0.6 points and 24-hour dealing on the France 40.

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