What to Expect on French Elections Round 1? Frexit? EURO sinking?

April 21, 2017

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What to Expect on French Elections Round 1? Frexit? EURO sinking?

This article is originally referred from FXGiants SNS

Today’s Highlights | 21.04.2017

French elections: Round 1

  • On Sunday, French people are called to elect their President. According to the polls, no candidate gathers majority, so a second round is scheduled on the 7th of May.
  • Given the latest increase in support for Melenchon (EU-sceptic), a run-off between him and Le Pen seems to be the biggest risk scenario. EUR could sink.
  • General risk-off market response.
  • The other side of the coin: Macron-Fillon. EUR could strengthen. General risk-on as the risk for any “Frexit” referendum is eliminated.
  • Polls: Most likely outcome: Macron-Le Pen. EUR to rebound, some risk appetite. Macron is seen as winning the second round. (Generally, Macron is seen as winning any of the others in the run-off).
  • In the unlikely scenario of Macron being kicked out, the only combination that could be seen as somewhat EUR-positive is Fillon- Le Pen (Fillon favorite). In a Fillon-Melenchon comb. (Mel. favorite).
  • Of course, much will depend on who comes first in these combs. and by what margin.
  • Best proxy EUR/JPY. Could fall sharply in risk off. Could rebound more than others in risk appetite.

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