The first round of the French Presidential elections is held on Sunday, April 23rd, and the stakes are very high. Opinion polls in the past week have been showing an open 4-way race. Any two of the four leaders can make it into the second round.
Here is some background towards the highly anticipated race, followed by four scenarios. Each scenario is accompanied by its probability and expected impact on the euro with EUR/USD targets.
Background
Not your usual French elections
France holds two rounds of Presidential Elections. 11 candidates are vying for support in the first round on April 23rd. The top two will meet each other in the run-off on May 7th.
This presidential campaign is different than in previous years. The outgoing President, Françíos Hollande of the center-left Socialists, decided not to run for a second term, an unprecedented decision. His former economy minister Emmanuel Macron split from the party and announced his own candidacy.
The mess within the ranks of the Socialists was supposed to hand in the elections to the center-right Les Republicans. Any candidate was expected to reach the second round against extreme-right Marine Le Pen and handily win. However, Françios Fillon, a former Prime Minister, and the candidate was embroiled in scandals and refused to quit.
So, there is good chance that neither of the parties that ruled France will have a candidate in the second round.
The four horsemen
Here are the candidates, ordered by the recent opinion polls.
Marine Le Pen: Leader of the extreme-right National Front. She has a clear anti-immigration stance and more importantly, for markets, wants to hold a referendum on France’s EU membership. There is no euro or the European Union without France, in the core of the core and a founding member. Her victory alone could start the ball rolling towards the end of the euro and she scares markets.
Emmanuel Macron: The 39-year old left the Socialist party and positioned himself as a new politician of the center with his En Marche party. His economic propositions are considered market-friendly. While he is the markets’ favorite, it is unclear if he can receive enough support in parliament for his agenda. In addition, his supporters are not that certain they will vote for him.
Françios Fillon: The leader of Les Republicans managed to weather the allegations that he paid his wife and sons a parliamentarian salary for not doing any work and sticks in the race. His ideas are also market-friendly but his lead against Le Pen in the second round is not as wide. He is despised by many voters who might stay at home in the second round.
Jean-Luc Melenchon: The radical-left candidate was not counted by markets until a fortnight ago. His excellent debate performances put him firmly in the race. Melenchon, an ex-communist, has many unfriendly options. The specter of a Le-Pen vs. Melenchon run-off has haunted markets recently.
Benoit Hamon: The surprising victory of the extreme-left candidate in the primaries of the Socialist Party put the candidate in competition with Melenchon but he soon became irrelevant for centrist voters. His poor debate performances put him basically out of the race.
