French Elections 2017 – EUR Under Distress?

The French Elections have the potential to deliver yet another strike to the Euro's already strained confidence.

Markets are showing surface cracks – French bonds have seen yields against German debt at 2012 levels.

Although elections always have an effect on markets and traders’ psychology – the inclusion of a pro-Frexit and hard-right candidate in this year’s French Presidential election Marine Le Pen, has shaken confidence further in the one-currency’s union and ultimately its longevity. The ripples this presidential race has created are being felt in the form of investors flocking to safe havens like gold and yen against the euro and beyond. As further proof of this risk aversion - on Tuesday, French bonds fell by 1.6 percent.
Here is a break-down of the top three candidates, their party, platform, experience and how they might affect the Eurozone and markets in general.

Marine Le Pen – National Front – Far-Right

Lawyer and incumbent President of the Far-Right National Front Party of France, succeeding her father. Unfortunately, she also seemed to inherited her father’s far right (bordering on nationalist) ideologies regarding immigration, foreign policy and ultimately an untethered-from-the-EU France including a return to the Franc.

As a candidate, Le Pen has the potential to further damage confidence in the already bruised Euro. This could arguably be another catastrophic strike to the Economic Union - consecutively losing two key economies within months of each other (the British economy being the first). In a long-term perspective, it could even jeopardize the integrity of the Union itself, instigating other country-members to exit.

Francois Fillon - The Republicans – Center- Right

Arguably the most experienced of all the presidential candidates having been Prime Minister during President Sarkozy’s administration. He has been called an economic liberal i.e. favoring business and development and is a staunch pro-E.U. supporter. As he is considered the politician to beat Le Pen, due largely to his socially conservative ideologies – which have some overlap with Le Pen’s, meaning he could appeal to the same demographic the far-right candidate does, essentially “stealing” voters from the National Front Candidate.

A win by The Republicans could ultimately mean a reversal of all of the weariness surrounding Le Pen’s election. Confidence in the Euro although not immediate would return and Union’s French-nay-sayers would be silence at least temporarily. The policies that he has promised in his campaign although high-reaching would reinforce the private sector and benefit French stocks.

Emmanuel Macron - On the Move! – Center

The most moderate of the candidates, Macron has previously served as the country’s Economic Minister, meaning that markets will inevitably response positively if he is successful in the presidential race. He too is pro-business but also has promised to restructure France’s pension system, lower tax on business and up to 50 billion euro in public spending funds.

Although all of the promised policies Macron mentioned during his campaign seem positive, he has not given definitive ways to achieve his lofty goals. In the case of Macron’s election, French stock will most probably see an increase but will still be wary, waiting to see if his initial promises are put to action.

No matter what happens on Sunday, you will be able to keep up to date with all the markets using the MT4 platform that is included with our STO accounts.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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