In keeping with the theme of political shakeups so far this year, the French could be gearing up for another revolution in their upcoming elections. Why does this event matter to forex traders like you and me?
When will the elections take place?
The first round of the French presidential elections will be on April 23, 2017 and the second round will follow on May 7, 2017 if no candidate is able to secure an outright majority. In this two-round system, the top two candidates from the first round have a run-off in the second round since they need to gain more than half of the votes in order to be declared the winner.
Political parties are now busy choosing their candidates and, mind you, the options are not as sparse as a French wardrobe or as clear-cut as the Democrat-Republican divide in the United States. There are more than 20 political parties in the nation, and that’s not counting the coalitions formed among some of ’em!
Who are the front runners?
Dominant political parties in France include the Socialist Party, Les Républicains, and more recently National Front. To make things more interesting, these parties have been holding run-off polls of their own, with ex-prime ministers Francois Fillon and Alain Juppe to go head to head next weekend to determine the candidate for Les Républicains.
Between the two, the odds may be in Fillion’s favor, as he was also blessed with an endorsement from former French President Nicholas Sarkozy who was bumped off in the first round last weekend. This in itself was seen as a sign that the French population is veering away from the status quo and leaning towards candidates without any political baggage.
Political analysts say that the French anti-establishment populist vibe could be strong enough to carry Front National leader Marine Le Pen all the way to presidential victory – a scenario that is touted to be as shocking as Trump’s win, the Brexit decision, or the Brangelina split. After all, Le Pen has been banking on anti-immigration sentiment in her campaign and appealing to working-class voters frustrated with previous administrations.
Any chance of a “Frexit?”
Not only is the French exit Happy Pip‘s favorite way to leave a party, but it could also become a very real possibility for euro zone’s second largest economy if Le Pen becomes president. In an interview a few weeks back, the Front National leader proclaimed that she would ask the European Union to return legislative, territorial, economic, and monetary sovereignty to France, citing that the Brexit outcome actually shored up confidence and trade for the United Kingdom after the referendum.
In fact, Le Pen already called for a referendum on EU membership after the Brexit decision was made official back in June, but French President Francois Hollande turned down this proposal. Still, a poll by Pew Research Center around that time revealed that 61% of French voters had an unfavorable view of the EU, which could be indicative of how an actual referendum might turn out.
Unlike Italy whose government cannot hold a referendum on anything related to international treaties, the French have actually held one of their own back in 2005 when citizens were asked to approve the new EU constitution. At that time, majority in France didn’t vote “Oui” to the treaty but this outcome was ignored by the ruling elite, marking the start of growing Euroscepticism in the country more than a decade ago.
What does this mean for forex traders?
Although the elections are still months away, political headlines in France are starting to impact the euro’s price action lately. In particular, reports and opinion polls reflecting the rise of populist sentiment and setting the stage for a bitter divorce with the EU have been bearish for the shared currency. After all, a potential Frexit could set a precedent for the rest of the EU nations such as Netherlands and Greece who have also seen a rise in Eurosceptic movement.
In the meantime, keep your eyes and ears peeled for remarks from the presidential front runners, as this could set the tone for their campaigns leading up to next year’s elections. Word through the grapevine is that Juppe would be a stronger contender against Le Pen so a win by Fillion in the weekend Les Républicains run-off could make it easier for the pro-Frexit Front National leader to emerge victorious.
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