As French voters return to the polls May 7th to cast their second and final vote for president, the result is likely to have far reaching implications on the global economy, currency trading and the Forex markets.
Favorite-to-win is Socialist Emmanuel Macron who most view as the best choice for the markets because of his position to maintain the economy as a Euro Zone participant. His pro-EU stance is viewed as the most popular choice and polls show him ahead with a fairly comfortable margin. Macron is calling for Germany to reflate its economy, which would boost French exports, and for a Eurozone Parliament and Finance Minister to manage the EU budget.
In close second is Marine Le Pen, an “extreme” right member of the National Front party who has voiced support for a two currency system based on the Euro for international trading and the French franc for everyday use. Further complicating Le Pen’s platform is her lack of commitment to remaining part of the Euro Zone at a time when polls report that 70% of the French people favor sticking with the Euro Zone’s single currency system.
Throughout history, France’s economy has been significant in terms of its economic and political influence. The leader it selects will therefore have a strong impact on world events and, in particular, the Euro. Will it weaken or gain strength in the months ahead? We saw a surge in the value of the Euro after the primary election event, so one would expect that the victory of Macron is baked in to the current value of the Euro. But what happens to that currency in the short term should he lose, and what happens to the currency overall, should France decide to move to a single (franc) or two currency system?
While that question remains unclear at this juncture, it is a fact that the French economy hasn’t kept pace with Germany. While historically the two countries have remained “even” in terms of the standard of living, Germany is a clear leader today with lower unemployment and a stronger economy. With all of this in mind, investors around the world are paying attention to the election as a bellwether of what is to come and are wondering how it will all jive with the added volatility of events such as Brexit and President Trump’s election based on reinvigorated Populism.
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