The euro rose against the U.S. dollar as pro-EU French presidential candidate Emmanuel Macron was expected to win the first round of French presidential elections on Sunday night.
Early resultsthat centrist Macron will face far-right Marine Le Pen in the second round in two weeks’ time. Markets took solace from Macron’s lead, as polls show that he is a run-away favorite to beat Le Pen in the second-round vote. Both of the losing Socialist and conservative party candidates called on their supporters to vote for Macron on May 7.
The euro jumped 1.9 percent to $1.093, the highest since November. Government bond trading resumes tomorrow morning, but analysts expect French bond yields to fall as the nightmare scenario of a second-round contest between two anti-euro candidates — Le Pen and far-left candidate Jean-Luc Mélenchon — was avoided.
According to Kathleen Brooks, City Index’s research director, “The market reaction could be stronger than expected as investors’ begin to price in an easy win for Macron in the second round, and we could see €/$ rise to 1.12, the high from before the U.S. election last year.”
Similarly, JPMorgan’s Raphael Brun-Aguerre noted that the likely Macron presidency will be positive for France. “During the campaign, Macron underlined his pro-European stance. His economic program furthermore focuses on improving the labor market, by introducing more flexibility and reducing labor costs,” he said.
However, UBS Wealth Management economist Dean Turner cautioned that “this relief may prove to be short-lived though as markets will still be alert to the possibility of a Le Pen victory in the second round.”
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