French Election First-Round Results Boost Euro

The first round of France's presidential election showed that the far right gained the most votes and will advance to the final round, boosting the euro as some polls had suggested a larger share for the National Rally (RN).

Leading, Not In Charge

According to exit polls, the far-right National Rally (RN) received the most votes at 33.1% in the first round of France's presidential election, followed by the left-wing alliance at 28% and President Macron at 20.8%. While this puts the far-right in first place, an outright majority was not achieved. Voters will participate in a second round next weekend, where the RN could potentially gain the 289 seats required for an absolute majority in the National Assembly. However, projections suggest this is unlikely.

The euro, which had weakened since France's snap elections were announced in early June, saw a modest rebound of 0.2% after the first round results. The results were not as one-sided as initially expected, and there was anticipation of potential unrest if the National Rally won. So, instead, markets were relieved to some degree. Nonetheless, uncertainty remains, given another week of intense campaigning before final tallies.

The Next Steps

Voter turnout for the elections was the highest so far this century, reflecting high interest in the results, including growing public discontent with President Macron's policies. The divided electorate means there is likely a record number of three-way runoffs in this Sunday's election, which analysts say benefits RN. Shifting endorsements in response to initial results and calls to back former rivals could also impact the outcome as centre and left parties seek to prevent the far-right from gaining seats in Parliament. This allows third-place candidates to potentially withdraw to block RN from winning the seat - a strategy most likely to impact President Macron's centrist coalition.

If RN does secure enough seats, their 28-year-old leader, Jordan Bardella, may become Prime Minister. However, a more probable outcome is a split parliament, with the two main opposition groups vowing not to work with the largest party. It is very rare in French history for the President and Prime Minister to be from opposing factions, in a situation termed "cohabitation" - last occurring in 1997 under conservative President Jaques Chirac and socialist Prime Minister Lionel Jospin. An RN plurality without a majority would likely curb some far-right aims around immigration and EU integration but would also hinder legislation as rivals form an uneasy alliance to claim a fragile majority. This could lead to further snap elections.

Meanwhile, markets' brief hope after the first round must wait another week until uncertainty is either resolved or a new uncertainty emerges as France enters unprecedented waters with a far-right majority for the first time.

EURUSD Reversal?

EURUSD appears to have completed a descending wedge pattern at 1.0705, with the break above 1.0796 allowing further increases to 1.0846 and even 1.0920. If bulls fail to sustain the upward momentum, prices could move below 1.0765, exposing 1.0625 should 1.0665 fail to form support as a new local low.

Source: SpreadEx EURUSD

Key Takeaways

The far-right National Rally party received the most votes in the first round of the French elections, followed by the left-wing alliance and President Macron's party. While this puts the far-right in first place, an outright majority was not achieved. Voters will participate in a second round next weekend, uncertain about the outcome as campaigning continues. The results somewhat relieved markets after fears of a larger far-right share, though uncertainty remains until the final tallies conclude an unusual period in French politics.