How will the Euro react to the French Election?

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The French Presidential Election first round vote on Sunday 23rd April could potentially lead to highly volatile period of currency trading as investors reprice their expectations for the outcome of the run-off vote in May.

The two populist candidates, Unsubmissive France leader Jean-Luc Mélenchon and President of the National Front Marine Le Pen, have both pledged to hold a referendum on EU membership should they be appointed President. This would put the European status quo in serious jeopardy. Needless to say, a “Frexit” referendum would call into serious question the long term sustainability of the currency bloc.

Our base case scenario is for a Macron victory against Le Pen in the second round vote on 7th May. The chances of a Le Pen victory in the second round are tiny. A more serious risk for the Euro, however, is the possibility that Mélenchon would squeak by into the second round. At any rate, we have developed a matrix of potential scenarios based on the excellent statistical analysis of poll data carried out by Crosstab.


Which candidates are in the running?


Emmanuel Macron [En Marche!]

Centrist and former Economic Minister Emmanuel Macron has emerged as the unexpected frontrunner in this year’s election. We would expect a relief rally in the Euro should he make it through to the second round vote since he is comfortably ahead of all other candidates in the second round polls.

First Round Polling: 23%
Probability of overall victory (Crosstab Data): 68%


François Fillon [The Republicans]

Conservative François Fillon has suffered from a scandal hit few months during the election campaign. While he continues to poll reasonably well in the first round polls, his only real chance in the second round would be to stand against Le Pen. A run-off against Melenchon in the second round is a low probability negative scenario for the Euro, as Fillon would likely lose.

First Round Polling: 20%
Probability of overall victory (Crosstab Data): 14%


Jean-Luc Mélenchon [Unsubmissive France]

Unsubmissive France’ leader Jean-Luc Mélenchon has surged in the polls in the past few weeks. While Mélenchon, like Le Pen, has also called for an EU referendum, he is seen as less hostile to European institutions as Le Pen, although his election would certainly be a huge negative for the common currency.

First Round Polling: 19%
Probability of overall victory (Crosstab Data): 16%


Marine Le Pen [National Front]

Le Pen currently has a very good chance of making it through to the second round, with political statistics website Crosstab currently giving her around a 67% probability of doing so.

Regardless of who she faces in the second round, the likelihood of her actually winning the election looks very slim. A Le Pen presidency therefore remains a very low likelihood but a huge negative event for the Euro.

First Round Polling: 23%
Probability of overall victory (Crosstab Data): 2%


How will the currency markets react?


Using data generated from election website Crosstab, along with recent polling and the market perception of each candidate, we have generated forecasts of the impact on EUR/USD for each first round outcome.

We think a run-off including both Le Pen and Mélenchon would be a disaster for the Euro and we’d expect to see a significant immediate sell-off of up to 5% against the US Dollar. While still not a central scenario, it is far from impossible and remains the largest political risk for the common currency this year. Crosstab is currently placing around an 11% chance of a Le Pen- Mélenchon runoff compared to just 2% for an outright Le Pen victory.


First Round Outcome

Probability of Outcome*

% Change in EUR/USD **

Expected 2nd Round  Winner (Probability*)

Macron vs. Fillon



Macron (99%)

Le Pen vs. Macron



Macron (99%)

Le Pen vs. Fillon



Fillon (91%)

Le Pen vs. Mélenchon



Mélenchon (96%)

Mélenchon vs. Macron



Macron (92%)

Mélenchon vs. Fillon



Mélenchon (92%)

*Source: Date: 19/04/2017
**Ebury forecasts

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