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Euro in for tough weekends
Published on 20.04.2017 21:46

The Euro has strengthened against its US counterpart today in the lead up to this week’s French presidential elections which promises to be a tight race.

At 5.36pm (GMT) the euro was trading at $1.0751 up from $1.710 in yesterday’s trading.

In what is shaping up as an election that could decide Europe’s future, 4 candidates are vying to become France’s next president, and with no candidate expected to win the first round, volatility is set to continue with the Euro until the 2nd round of elections in May

“The best case scenario for the euro would be a Macron-Fillon run-off, while the worst case would see Le Pen and Melenchon fighting it out in the second round,” said Joshua Mahony, market analyst at IG.

“The most likely scenario still appears to be Macron and Le Pen in the second round, but there are plenty of undecided French voters who could make a difference and the vote looks as uncertain as it ever has,” he said.

If in fact there is an upset, and Eurosceptic candidates Jean-Luc Melenchon and Marine Le Pen go through to the 2nd round, some analysts believe that this could be the beginning of the end for the European union and the European currency as we know it

“If either Le Pen or Mélenchon were to become the next president, there cold be a big reaction in the markets, and in our view, it is likely that the euro would fall. A “Frexit” would pose an existential threat to the common currency. Even if investors thought that a “Frexit” wouldn’t occur any time soon, the two candidates’ views on monetary policy might be enough to make investors shy away from holding euros”. Noted Daniel Christen of Capital Economics

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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