EUR: Another surprise election outcome in France – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the euro has shown little reaction overnight to the surprise victory for former Prime Minister Francois Fillon in the first round of the Republican primary.

Key Quotes

“A late surge in support resulted in Francoise Fillon winning the vote by 16 percentage points from the pre-vote favourite Alain Juppe. Francoise Fillon is now the clear favourite to win the second round of voting on Sunday and to become the next president.”

“He has the most free-market platform pledging to eliminate half a million publicsector jobs and cut public spending by EUR100 billion over five years. He wants to make the labour market more flexible pledging to lengthen the work week to 39 hours from 35 hours and increase the retirement age to 65. He also favours introducing quotas for immigrants.”

“The surprise victory for Francoise Fillon in the first round will introduce additional uncertainty over the outcome of the presidential election next year. The opinion polls have again failed to accurately predict the result. It may also leave market participants more uncertain over the outcome from a potential face-off between Francois Fillon and Marine Le Pen in the second round of the presidential election. The latest opinion polls revealed that Alain Juppe was expected to fare better against Marine Le Pen in a head to head vote given his more centrist policy platform which could have wider appeal. From that perspective, the latest developments may be seen as modest negative for the euro in the near-term. However, if Francoise Fillon is elected as president he is likely to be welcomed by market participants.”