France is voting for President on Sunday, April 23, putting the whole union on concerns. After U.K. vote for Brexit, the French presidential election is a major test for the Euro area’s unity, thus we expect the first round to trigger high volatility in the euro currency pairs and the European stock indices. The level of volatility is highly dependable on election’s results. If none of the candidates wins a majority, second round of elections will take place on May 7th with the two top candidates.
The risk to the Union comes from the beliefs of the candidates and the top two names, or the name of the newly elected president will be determinable for the intensity of market’s volatility. The candidates are five Marie Le Pen, Emmanuel Macron and François Fillon, Jean-Luc Mélenchon and Benoît Hamon. Marie Le Pen, leader of the far-right National Front and Jean-Luc Mélenchon representor of far-left Unsubmissive France promised significant changes in the relationship between France and the European Union. Both candidates want a referendum on E.U. membership while Marie Le pen supports keenly the exit of France from Eurozone and the return to the franc. After Brexit, another E.U. referendum from a country-member and especially the abandon of euro from the second biggest economy in the Euro area will spark a turmoil Europe. It will hurt strongly the E.U. project, the shared currency and the European stock market as France is an integral part of both the Eurozone and the E.U.
French elections can trigger high volatility in the market or be a non-event, therefore it is advisable to trade the event with great caution. The candidates that will go to the second round of elections are very significant for the market reaction. The riskiest scenario, that will shake the market, is Marie Le Pen to gain the majority of votes and get France out of the euro. This will be a strong slap to Germany as it is the strongest economy of Eurozone and is affected directly by Eurozone’s risk, as well as because German and France are the traditional partners in the heart of the E.U.
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