TUESDAY 23RD MAY 2017
What does the election of Emmanuel Macron as the new French president mean for the currency markets and the Brexit negotiations?
Euro strengthens as Macron triumphs
After the shocking political twists of 2016 (namely Brexit and Trump) there was a great deal of uncertainty swirling around in the build up to the French Presidential election. Fears that Marine Le Pen (the far-right, anti-EU leader of the National Front) could triumph against the odds initially kept the euro under pressure. Le Pen’s campaign focused on the emotive issues of immigration and national security, her desire to hold a referendum on French membership of the EU and plans to remove France from the Eurozone.
However, while Le Pen made it through to the second round, polls showing that centrist Emmanuel Macron would ultimately win by a significant margin meant that EUR exchange rates jumped as the results of the first round were announced on 23rd April.
As the outcome of the final round of the French election was expected ahead of time, the currency market’s reaction to Macron’s victory on May 7th was pretty muted. However, since then the euro has been steadily edging higher, and EUR/USD jumped to its best levels since Donald Trump was voted President of the US in 2016.
But what will happen to the currency market with Macron at the head of the Eurozone’s second largest economy?
Macron’s take on Brexit could weigh on GBP
Emmanuel Macron was sworn in as the President of France on 14th May – officially making him the nation’s youngest leader since Napoleon. In his first few days in office Macron gave the euro another boost by appointing Conservative Edouard Philippe Prime Minister and selecting a diverse cabinet based on European unity and gender parity. It also incorporates a mixture of left and right wingers.
However, while hopes for stability and strength in France under Macron are lending the euro support, concerns about the new President’s views on Brexit could spell trouble for the pound.
During his presidential campaign, Macron famously described Brexit as a ‘crime’. After meeting UK Prime Minister Theresa May earlier in the year he also told reporters in Downing Street; ‘Brexit cannot lead to a kind of optimisation of Britain’s relationship with the rest of Europe. I am very determined that there will be no undue advantages.’
If Macron takes a hard-line stance during the UK’s Brexit negotiations with the EU and attempts to prevent Britain securing a lucrative trade deal, fears for Britain’s long-term economic outlook could send Sterling spiralling lower.