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.
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. Neither NoaFX nor the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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