Pent-up demand for EUR assets sitting in cash, EURUSD could go to 1.10 on Macron/Fillon

How big of a risk is the French election for the markets?

Not that significant as the French system will not return Le Pen as President, which is the major risk. 

Which is the best tool to track French-election market risk? French bonds? CAC-40? Polls?

Bonds and their differentials, the polls are too unreliable and many French voters have not declared their hand. The rise in Melenchon this week is interesting - but its Macron vs Le Pen in round 2 

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 will not happen IMHO, however, 1.05 is pivotal and then 1.02 before parity.

And how high could the EURUSD rally if Fillon vs Macron was the outcome of the first round?

1.10 and then 1.15 - I believe there is pent-up demand for EUR assets sitting in cash currently.  

Could the French election have a GBP-Brexit-type effect on the EUR?

Of course, but only in the 2nd round.

Should traders prepare for important gaps in the Euro on the post-election Monday openings?

Yes, but I do not believe there will be the surprise - markets would have moved already. 

Where would capital fly in case of a EUR meltdown if there was a Frexit? German bonds? USD? Other currencies?

Fear of Frexit is real - the whole point of the EEC, Euro and EU was for and by the French, without the French it is finished. USD and more BOND buying 

Is the European Union "two-speeds" idea good for the EUR in the long-term?

Nice question - It probably is but it is a non-starter politically and for the ECB. The Premier League of the North and the poor souls of the Southern periphery. Closer political ties are necessary if the EUR is to survive and the EU as a whole.  

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