Le Pen through to second round but Macron's final victory now looms

Financial markets feared a second round between Jean-Luc Mélenchon and Marine Le Pen who was likely to trigger some volatility. Marine Le Pen’s final result below 22% is disappointing as she was expected in various polls to reach between 27% and 30%.

The failure of Le Pen or Mélenchon to sway undecided voters or unlock closely-guarded voting behaviours will come as a major relief to investors fearing uncertainty over whether the second round would bring a new set of complexities. At present, extreme volatility has been avoided. Emmanuel Macron and Le Pen will move forward to the second round run-off on May 7.

The result is very market-friendly. The failure of Marine Le Pen or Jean-Luc Mélenchon to surge on voting day should be viewed as a vote for the EU. Eventually, Emmanuel Macron is now very likely to become the new French president. Most of the runner-up such as François Fillon who scored around 19%, are calling for a Macron vote for the final vote in two weeks. Even Mélenchon, which program was very similar to Marine Le Pen’s has been calling, through his lieutenants, to vote for Emmanuel Macron.

There had not been a massive relief, if any, in financial markets tomorrow. However the single currency may appreciate slightly against the swiss franc. There’s defnitely no fear for the second round. First final results estimates are now calling for a 62% Macron’s victory for the second round. European Union seems to win a battle and attention should carefully shift towards the German’s election in August.

We anticipate no extreme volatility in the FX market, with marginal Euro buying (as markets had positioned for this outcome) as exit polls become official results. We nonetheless remain long EURCHF on a rejection of an anti-EU vote.

By Yann Quelenn