French election polls are misleading
|How big of a risk is the French election for the markets?
The risk is essentially short-term. A Le Pen presidency would generate longer term risks. Between now and May 3 result, increased volatility is the best way to understand direction. Le Pen in the run-off will be a catalyst for a EURo weakness.
Which is the best tool to track French-election market risk? French bonds? CAC-40? Polls?
Similar to Brexit, polls will be most likely misleading and will cause spikes. However, by the time the election is over, Asian markets will open and reflect results. It makes little sense to watch the polls.
Polls are forecasting a very tight race among the main four candidates in Sunday’s first round: how low could EURUSD go in case of a Le Pen vs Mélenchon showdown in the second round?
It can move twice the Average True Range it has been in in the past week.
And how high could the EURUSD rally if Fillon vs Macron was the outcome of the first round?
A relief rally will occur, but less in its range than a fear rally if Le Pen is in.
Could the French election have a GBP-Brexit-type effect on the EUR?
Not exactly. Brexit was a tectonic shift in relationship of the UK and the Eurozone. Even if Le Pen wins, France is not likely to leave the Euro
Should traders prepare for important gaps in the Euro on the post-election Monday openings?
The Asian and London Monday sessions will enable trading, without gaps
Where would capital fly in case of a EUR meltdown if there was a Frexit? German bonds? USD? Other currencies?
Of course, Gold, the CHF will benefit. This is a very unlikely event.
Is the European Union "two-speeds" idea good for the EUR in the long-term?
No, if the European Union starts modifying the terms of cooperation and the obligations of its 27 members, it will not be able to justify itself. The Euro will be doomed.
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