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Lower In Early Asia Pac Trade As Polling Points To Left Victory In French Elections

EUR

In early Monday Asia Pac dealing, EUR/USD is weaker. After closing at 1.0840 on Friday (post the weaker US non-farm payrolls print), we got to lows near 1.0800 in the first part of dealings. We sit a little higher now last close to 1.0815, still 0.5% weaker versus end Friday levels.

  • Polling released after voting ended in the second round of French legislative elections show the left leaning New Popular Front, is projected to get the most seats (172-210). The right leaning National Rally is projected to come third (113-152), while President Macron's alliance between 150-180. See this BBG link for more details.
  • This is a reversal of the first round, where Le Pen's National Rally fared much better.
  • If the results are realised focus is likely to rest on who the next French Prime Minister is. Current PM Gabriel Attal has stated he will resign on Monday (BBG), along with who forms government to run the legislature.
  • A more left leaning legislative risks greater fiscal expansion, which is a key mandate for the New Popular Front. Hence concerns over the French fiscal outlook, which could see French-Government bond spreads widen. This is weighing in EUR/USD in early dealings.
  • Note the 50-day EMA sits back near 1.0775.
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