French election results provided collective sigh of relief across markets - Rabobank

According to Michael Every, Head of FMR at Rabobank, one can hear the collective sigh of relief across markets: indeed, EUR/USD initially surged around 2% to a five-month high of 1.0937, and US 10-year yields jumped 7bp to 2.31%, as the first news broke that the first round of France’s presidential election had been won by centrist Macron, with the far-right Le Pen joining him in the second round next month.

Key Quotes

“Indeed, for markets this means that the nightmare scenario of a Le Pen (far-right) – Melenchon (far-left) run-off has been avoided. Moreover, an initial snap poll of voters confirms that as things stand now, in a head-to-head contest, Macron would handily defeat Le Pen by around 62% to 38%. So, crack open the champagne!”

“Yet perhaps fizzy water would still be more appropriate. Let’s just take stock for a moment. The French political establishment has effectively been dismantled: as in the Dutch election, the Socialist Party slumped, but unlike there, so did the centre-right Republicans. Le Pen is an obvious outsider while Macron himself has no political party behind him, and has made a great deal of apparently transcending old politics, even if how that will be achieved and what it actually means in practice are still vague.”