Markets took great comfort in last night’s victory for Emmanuel Macron, who beat the far right Marine Le Pen in a landslide. At the time of writing, Emmanuel Macron leads Marine Le Pen 65.8% with over 98% of the votes now in. Interestingly, the Euro has lost ground against the Pound and US Dollar at the start of the trading session, despite a clear market backing for Macron’s economic policies.
There are a number of potential reasons for this, one being that Macron is the youngest French President in history, the other being that he faces a country divided on many issues from employment to immigration.
How does a Macron victory affect Brexit?
Given Macron’s pro-EU stance and labelling of Brexit a ‘crime’ its easy to envisage that Brexit will become more challenging under the new French leader. However, Macron has bigger fish to fry given that his movement needs to build support in the National Assembly where current polls suggest he will struggle to build a majority in next month’s elections. He also faces the challenge of bringing France together over a number of key issues from immigration and employment, which he knows under current EU laws will only support Le Pen’s next run at Presidency in 2022. Macron hopes he will bring reforms to a number of key issues in France, and to do so, he will need all the friend’s he can get.
François Hollande has already provided France’s tough stance on Brexit, it’s unlikely Macron will have anything else to add at this stage.
Super Thursday – further movements for GBP/EUR?
A big day for the Bank of England on Thursday with the latest Interest rate decision and Monetary Policy statement. Although no change is expected the recent trend in UK economic data supports a strengthening of the Pound. Manufacturing and Industrial production levels will also be released on Thursday as well as the latest GDP estimates from NIESR. This could be a volatile week for the Pound, but I envisage the Pound breaking 1.19 against the Euro and 1.30 against the US Dollar.