Pound to Euro exchange rates are experiencing major volatile since the shock snap election announcement earlier this week. GBP/EUR continues to climb but struggles to push through 1.20 resistance levels. This weekend could spell the end to these resistance levels as markets prepare for what could be another shock victory in the French elections.
Marine Le Pen, who up to now looked set to face Macron in the second round of the elections, could now be up against Fillon or Melenchon.
A run off between Marine Le Pen and Fillon has markets worried following the scandal surrounding Fillon, but a run off with Melenchon could be worse for Euro investors, as both candidates have expressed distaste towards the single currency.
Will the terror attacks in Paris boost support for Le Pen
Following the attack in Paris last night, many have raised concerns that Le Pen’s campaign could be strengthened. With 25% of French voters still undecided the latest attack just days before the first round, could sway voter’s towards the far-right candidate.
France has been subject to a number of terrorist attacks in recent years and Le Pen’s promise to limit immigration and control borders will appeal to many left afraid by the continuous attacks on French soil.
The first round begins on Sunday, with early polling data released shortly after. Markets will have some indication before markets open on Monday. If Le Pen looks promising in the first round we could see some noticeable Euro weakness early next week.
Le Pen unlikely to win the second round
Despite the shock victory for Trump and Brexit, the way in which French elections work makes it difficult for Le Pen to secure victory in May. If there is no clear majority in the first round (50% or more), voters will chose between two candidates in the second round.
This is where it becomes a challenge for Le Pen, and depending on who she faces, voters who back a more moderate candidate are likely to merge together in fighting Le Pen’s campaign. A similar situation emerged in 2002 when her father, Jean-Marie Le Pen, made it to the second round before suffering a huge defeat.
Whilst its unlikely Le Pen will win, nothing should be ruled out in these uncertain times and with France being subject to a number of terrorist attacks, the undecided voters could sway the result.