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French Election: Macron And Le Pen Enter Final, Euro Soars Across The Board


With 97% of the vote counted, Emmanuel Macron and Marine Le Pen would enter the second and final round of the French election, scheduled on May 7. The election result of the first round came in largely as projected in opinion polls. Yet, the market was thrilled with the EURUSD soaring to the highest level in 5 months, rallying as much as +2% at one point. Indeed, the strength in the single currency was broadly based. EURJPY jumped more than +3% before retreat while both EURGBP and EURCHF have risen over +1%.DJIA futures also soared, reflecting improving sentiment.

Markets relieved as Macron Shone

The market was relieved as Macron is believed to have higher chance to win eventually and thus a Frexit referendum could be avoided. Besides, the market reaction also reflected how tight the race was. The market refrained from relying on opinion polls as the supports for major candidates were close and the percentage of undecided voters was high. Meanwhile, the predictive power of opinion polls has be doubtful after the surprising results of Brexit referendum and US presidential election

Melenchon failed despite recent surge

Securing 23.9% and 21.4% of the votes respectively, independent centrist Macron and far-right populist Le Pen are confirmed to enter the runoff early next month to fight for presidency. They were followed by scandal-hit Francois Fillon who got 19.9%. Despite a late surge in polls, Jean-Luc Melenchon failed to excel further with 19.6%. As we mentioned previously, he would not be able to draw much more votes from his closest political rival, Benoit Hamon, who got 6.3% of votes (we forecast "around 6%"). Total votes for the leftist camp also fell within our projection of 25-30%. Turnout for this year is 78.3%, slightly lower than 79.48% in 2012.

Macron called for "rally against nationalist"

Speaking to his supporters after the election, Macron suggested that "the face of French political life" has been changed in a year. He pledged to bring together the French people and called for the "rally against nationalist". Le Pen described the outcome as "an act of French pride, that of a people who are raising up their heads, that of a people sure of their values and confident of the future". Le Pen affirmed herself as "the candidate for the people" with the "survival of France" at stake.

Fillon and Hamon support Macron after defeat

Accepting failure, Fillon called for his supporters to choose Macron over Le Pen. Hamon made the same request in Tweeter, noting "J'appelle à battre le plus fortement possible le Front national en votant pour Emmanuel Macron, même s'il n'appartient pas à la gauche". Their rationale is to prevent a far-right extreme party from taking control of the government. Recent polls by Ifop, Ipsos and Elabe signaled that Macron would beat Le Pen in the runoff with over 60% of vote. Yet, we advise to act cautiously and expect high volatility in the financial markets from now through to the election day.