Volatility in the euro has soared to the highest levels since the weeks before the Brexit vote as investors grapple with the risk of a populist triumph in France’s presidential election.
The first round of voting next Sunday is forcing investors to focus on a presidential race that opinion polls suggest will see Marine Le Pen, the far-right leader of the National Front, through to the second-round run-off on May 7.
The risk is that the far left and the far right make it into the second-round run-off. Although this outcome still has a slim probability, the market is showing signs of nervousness about a shock result from the French election.
Although portfolio managers, worry about the victory of the populist party, they remain with increased appetite for the euro and European stocks. If we see Le Pen's victory, it will have a very negative impact on European stock markets and the euro, forcing optimistic traders to sell off their expectations.
The percentage of the first round of elections is as follows:
Marine Le Pen - 23%
Macron - 23%
Fillon - 20%
Melenchon - 19%
Source: Financial Times
Jr Trader Petar Milanov
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