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French Presidential Election: What to Expect on Monday

French Presidential Election: What to Expect on Monday

Talking Points

- The markets are primed for a win by Macron on Sunday so victory for Le Pen would send the Euro and Paris stocks tumbling.

- But with a Macron victory fully priced in there could be falls if he wins too once initial relief wears off.

- Check out the DailyFX Economic Calendar and see what live coverage of key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

The markets have handed down their verdict: independent centrist Emmanuel Macron will win the French Presidential Election on Sunday and both the Euro and Paris stocks will rally on Monday. If the right-wing Marine Le Pen wins, they will crash. The latter is probably true but the former much more questionable.

Le Pen is highly skeptical about both the Euro and the European Union as a whole, and the latest opinion polls show her trailing way behind Macron. The most recent put Macron on 62% and Le Pen on 38% so a victory by Le Pen, seen as the less market-friendly candidate, would cause mayhem. The gold price would soar and the spread between 10-year French and German government bonds, now at its lowest level so far this year, would rocket.

But what about a victory by Macron, the markets’ preferred choice? There’s likely to be a relief rally for sure. But one of the markets’ favorite sayings is “buy the rumor, sell the fact” so such a rally could easily falter and reverse in next to no time.

Listen to my webinar (in English) with DailyFX/Francais expert Valentin Aufrand here

IG Client Sentiment data for EUR/USD currently show 68% net short and just 32% net long, suggesting that a Macron victory could quickly lead to short covering and a consequent rise in the pair. But overall the data are sending out a bearish signal, with fewer traders net short than previously.

Moreover, the CAC 40 stock-market index is already at its highest for almost nine years, while EUR/USD is at its highest for six months, leaving plenty of room for profit-taking.

Chart: EUR/USD daily Timeframe (November 2016 – May 5, 2017)

Chart by IG

As the chart above shows, the pair is already close to overbought territory after this week’s television debate between the two candidates, which Macron is seen as having won.

Then there are the French legislative elections, due on June 11 and June 18. Macron’s party, En Marche!, is set to emerge as the largest in the National Assembly elections, according to an OpinionWay-SLPV Analytics poll for Les Echos, the newspaper said Wednesday. But, as always, that’s uncertain so there will be a large element of risk for the Euro and Paris stocks even after Sunday’s result.

Add in to the mix the likelihood that Euro-Zone monetary policy is likely to remain accommodative for months yet while US interest rates are set to rise, and there’s little obvious reason why EUR/USD should strengthen. By far the safest option, therefore, is not to leave any Euro positions open over the weekend.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at

Follow Martin on Twitter @MartinSEssex

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.