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.
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