French elections to impact inflation – HSBC

Analysts at HSBC explain that experience from 2016 including the UK vote for Brexit and the US presidential elections has made it clear that politics are a key driver of the inflation market and French elections are no exception.

Key Quotes

“At the same time this means that market participants with specific views on the election outcome can hedge themselves through positions in inflation swaps and break-evens.”

“With the exception of a Fillon or a Macron victory, the French inflation swap curve should bull steepen. The market is largely reflecting recent polls, indicating a Macron victory as the most likely outcome.”