- French Election: Emmanuel Macron Claims Victory
Marine Le Pen on Sunday conceded victory to centrist Emmanuel Macron in France’s Presidential elections.
Macron is set to beat the anti-euro candidate Le Pen by about 65 percent to 35 percent, according to the estimates of four separate pollsters — a bigger lead than predicted by surveys before the election — and one which removes the risk of France being led out of the currency bloc. Macron’s victory in the first round sparked a rally in the nation’s assets, with the euro gaining as much as 2 percent in its immediate aftermath.
With polls consistently giving a Macron lead of about 20 points, markets had largely priced in a victory for the centrist, meaning the scope for a relief rally may be more limited this time. Still, Le Pen’s defeat removes a cloud that has been hanging over the shared currency for most of 2017, and will strengthen its longer-term outlook, according to analysts. Thin liquidity in early Asian trading could also lead to exaggerated moves when currency markets open at 7 a.m. local time in New Zealand.
“The euro is likely to gap higher by less than a cent as traders in New Zealand run stop losses,” Sebastien Galy, a macro strategist at Deutsche Bank AG in New York, said in emailed comments. “In the weeks to come, inflows into euro zone equities should give the euro some support, but so will other factors.”
The shared currency closed at $1.0998 on Friday, up 2.5 percent since the first round of voting on April 23.
UniCredit SpA, which currently expects the shared currency to finish the year at $1.10, is likely to revise higher the forecast if the second round passes without any surprise, strategists including Vasileios Gkionakis said in a note to clients before the vote. Nomura Holdings Inc., and Bank of America Merrill Lynch both expect more gains for the euro, with the Japanese bank looking for a rebound to at least $1.15 in the next three to four months.
French Rally
The euro touched a six-month high of $1.10 last week, while French bonds and stocks have jumped since the first round of voting. The spread between French and German 10-year yields, seen as a key metric of investors’ concern before the vote, narrowed to the lowest since January on Friday, down from a four-year high in February.
French, Italian and Spanish stocks have been the big winners from the drop in perceived political risk since the first round. The CAC 40 has gained more than 7 percent, while the FTSE MIB is up almost 9 percent and the IBEX is up more than 7 percent. This compares with a gain of 2 percent for the S&P 500 and of 3 percent for the MSCI World index over the same period.
“It seems that political risks have subsided considerably already ahead of the vote,” Valentin Marinov, head of G-10 FX research at Credit Agricole, said on Friday. “This much could keep any gains fairly muted.”
