French Elections: Mélenchon risk to single currency is underestimated

During the second debate of the French Presidential Election, the 11 candidates had the chance to expose their views on many different topics.

Emmanuel Macron was widely expected to win and he was hardly attacked by the other candidates. No candidate performed badly and so it was very hard to find a winner.

In the markets, we can see the CAC 40 is improving more slowly than the Euro Stoxx 50. We try to measure investors’ fear and we believe banks’ stocks price are a good proxy for that. It is clear that their volatility is increasing.

Currency-wise, we do not see the single currency improving should Macron or Francois Fillon get elected. There is also a growing risk for the single currency as we believe Jean-Luc Mélenchon’s chance of winning is underestimated. His performances in the debates are always one of the most accomplished, if not the best. And his “Plan B” is that in the case of negotiation failure, he would not hesitate to ask for a Frexit referendum. So we now assume that Euro downside risks are not anymore only due to Marine Le Pen.

Yann Quelenn – Market Analyst – Swissquote