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French election 2017

After becoming president in May, Emmanuel Macron took a parliamentary majority in June. Find out how the elections played out across key markets like EUR/USD, gold and the DAX.

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Why did it matter to traders?

Viewed in hindsight, the anxiety surrounding the French presidential elections as campaigning began can be hard to fathom. After all, France voted in a popular, centrist leader in Emmanuel Macron – whose parliamentary majority will prove hugely useful in enacting some much-needed reforms, even if his enemies may claim that record low voter turnout undermines his mandate.

But this result was by no means a certainty, especially with the political rollercoaster that was 2016 still fresh in the minds of traders. And an election that saw ‘Penelopegate’ envelope Francois Fillon, Jean-Luc Mélenchon’s late surge in popularity, and the progression of far-right radical Marine Le Pen to the second round was always going to cause market jitters.

In the end, the markets’ preferred candidate won out, becoming the first president in modern political history not to represent one of France’s two mainstream parties in the process. Now, though, the challenges facing Macron are numerous: not least a slumbering French economy, a divided populace, and complicated negotiations with Britain over Brexit.

How Macron’s victory affected 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 EUR/GBP and EUR/USD.

While campaigning, the political upstart was vague about how his policies will be funded exactly, citing €60 billion that will come from ‘increased employment’ and ‘greater efficiency’. That may explain why market enthusiasm for Macron’s tenure remained dampened after his victory.

Still, there were reasons to be cautiously optimistic for his term. In particular, his planned policy reforms – such as overhauling the pension programme, cutting corporation tax and investing €50 billion in public spending – could jolt France’s economy back to life, with potential repercussions for the domestically-focused France 40.

Macron and 'Frexit'

Macron’s policy on Europe is clear: he’s committed to keeping France at the heart of the EU, which makes Frexit a hugely unlikely prospect under his leadership.

It isn’t just Frexit that matters to traders, though, and Macron also had much to say about Brexit during his campaign. He’s 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 Brexit is negotiated.

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