Tag: Macron

Business, Economy, People

Whew!

Whew!

The European Union and an entire basket of currencies just breathed a collective sigh of relief.  On Sunday May 7th, the technocrats of the EU are certain they just dodged a bullet….or more likely, a mortar shell to be precise.

The election of Emmanuel Macron as the new President of France over the nationalist parties Marine Le Pen, was a tremendous rebuke of the concept of France eventually dropping the Euro and leaving the European Union.  This was the position that Le Pen had espoused during her aggressive campaigning and with her losing 33.9% of the vote to Macron’s 66.1% it can be assumed that her stance was repudiated.

On the other hand, with over one third of the French population eligible to vote declining to do so in this election, many believe that Macron secured a strong majority of only around 44%.  It stands to reason that if only two-thirds of the voters showed up at the polls and he garnered 66% of the vote, he does not have a majority of Frenchmen supporting him.

Where to Start?

President-Elect Macron now needs to prove that he is “neither left nor right,” and can manage from the “center,” which was his message throughout the campaign.  The far-left will need to see his support behind social programs that have yet to bear fruit in a positive sense and the far-right will want to witness his embrace of the labor unions.

Conventional wisdom though says that his entire administration may actually hang on his Countries internal security and immigration issues.  Many political-insiders believe that the entire success of his incoming administration hinges on any future terrorist attacks that may occur on his watch.

No doubt, the obvious relief shown by Germany’s Angela Merkel and other EU allies has been palatable immediately following the elections outcome.  Now, it is expected that Mr. Macron will be calling in any and all favors that he can rely on to help build more positive relationships with France’s EU trading partners.

The Immediate Effect…

The Euro has rallied briefly to a six-month high against the Dollar on Monday in support of Macron’s election.  The single currency touched $1.1023, which is its highest level since November 2016 and was up from its close on Friday of $1.0998.

The currency also hit a one-year high of 124.59 Yen from 124.05 Yen on Friday’s close.  However, these gains have all been short –lived and more modest than expected compared to the reaction following Macron’s first-round victory last month.  Since the outcome of the election eliminates any risk of France leaving the single currency bloc, it is expected that the Euro will continue to stabilize over the next several weeks.

MosaicaFX would strongly recommend that you stay in close touch with your Foreign Currency Account Managers to ensure that you remain well positioned to protect your profits going forward if you trade within the EU or on the Euro.  At MosaicaFX we would welcome the opportunity to discuss this new development with you and look forward to answering your questions.

 

Business, Ecommerce, Economy

A Second French Revolution?

A Second French Revolution?

We decided to let the dust settle from the Sunday first round of French elections before we tried to ascertain a fixed bearing to address from this outcome.   Needless to say, the results of the election almost create more questions than they answered.

The good news is that the “market horror,” scenario of a Le Pen vs. Melenchon run-off has been avoided.  The not-so-good news is that the poll differences between the top two finishers, was smaller than the anticipated margins of error.  This fact coupled with the combined percentage totals of the losing candidates most likely means that neither of the top two finishers may command a populist majority during the runoff.

While the polls  showed that that Centrist Macron and Right-Wing Le Pen qualified for the second round of voting to be held on Sunday May 7th, these same polls are now predicting that the likely winner (if the election were held today) would be pro-European Union centrist Emmanuel Macron…resulting in him becoming the new French President.

What Can We Expect if Macron Wins?

As previously stated, it appears as though Mr. Macron currently has the inside track to be the next French President.  If this were to happen how can we expect the financial markets to react to such news?  If the current financial markets reaction to him making the May runoff is any indication, relief may be the key word.

If Macron becomes the next Chief Executive of France it would be expected that concerns regarding France leaving the EU would greatly ease.  Mr. Macron is a huge fan of the EU and the Euro currency.  In fact, European shares surged to a 17-month high after Emmanuel Macron advanced as the favorite in the runoff over his nationalist opponent.  After opening to the best gains on record, the Euro scaled back as the week has advanced.

Macron, a committed globalist was the leading candidate as confirmed by a “snap” Ipsos survey late Sunday after the polls closed.  The survey suggested he would win with 62 percent of the vote to Le Pen’s 38 percent.  It is expected that macron would not only help to stabilize the European Union, but would also help integrate stronger support mechanisms…according to Azad Zangana, Senior Economist for Europe at Schroders Plc in London.

Mr. Zangana went on to say, “The contest is not over yet, but investors are likely to take comfort and to begin to think about the more attractive valuations that European equities offer.”

…And if Le Pen Wins?

At this point, most traditional survey houses have Le Pen losing in a runoff against Macron.  This may be wishful thinking.  With many unanswered questions in Macron’s background and the recent new terror attack in France leading up to the election, Le Pen’s supporters have been invigorated.

As for the effect that a Le Pen Presidency would have on the markets, most economists believe it would roil the currency and financial markets… at least in the immediate aftermath of her election.  Le Pen is the French version of Trump.  She wants to remove France from the EU, clamp down on immigration and support French labor organizations.  Many see a vote for Le Pen as a form of “revolution,” when it comes to the current globalist view of the French government.

She is also someone who does not mince words when it comes to terrorism and the influx of radicals who see France as a country that can easily be over run.  Le Pen has openly called for a much more aggressive law enforcement and military response to terror attacks and internal security for France.

The Smart Money…

At this point, a lot can happen between now and the May 7th runoff.  Macron may be polling higher, but many attribute that to the entrenched, elitist views of the “old guard,” that supports a more globalist view of France…who happen to also control many of the polling organizations who are publishing those surveys.

Le Pen is no “shrinking violet,” and is more than able to go toe-to-toe with Macron in the very public ongoing policy debates they have been embroiled in.  Macron is not without his own baggage as many believe he helped orchestrate much of the economic turmoil France has struggled with over the past several years.  If not him directly… he shares many of the common public and financial policies that contributed to high unemployment and a weakened economy.

As Le Pen will undoubtedly highlight these past associations with Macron, it is possible that the polls could be wrong.  As we saw with the last U.S. Presidential election….survey’s and polls are not infallible.  However, it will most likely come down to how effective Le Pen can make the case that she is the best suited to keep France safe from future terrorist attacks.  If Macron can successfully make a similar argument then he will most likely win the runoff.

The smart money says…the election is Mr. Macron’s to lose.