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Looking at The Data

With the first round of the French elections rapidly approaching (April 23^rd), voters’ sentiment appears to have settled around roughly 25% each for both centrist candidate Macron and Far-Right candidate Le Pen with Francois Fillon holding behind around 18% – 20%. The latest data reflects a gradual but steady decline in abstentions with turnout intentions rising to 64% in April from 59% in March and likely to continue to rise approaching the voting.

The data also suggests that voters are becoming more certain of their choice with 70% of electors saying that they are now sure, which is up sharply from earlier in the campaign. Le Pen and Fillon have had strong support from their voters throughout the campaign who register around 80% sure while Macron, whose voters have been unsure up until recently have now jumped to register 67% as sure of the centrist candidate.

Voters’ Worries

Polling on the issues concerning voters has revealed that the majority (53%) are worried about unemployment with purchasing power just behind at (51%), social security came in third (48%) with security fourth (40% and terrorism fifth (38%). Interestingly, immigration came in sixth at just over 33%. As such it seems that the main concerns of voters fall outside the core areas of focus of Le Pen’s campaign which are globalisation, Europe and the place of France in the world. Indeed, the number of French voters looking to return to the Franc is at its lowest in years. A poll conducted by Ifop at the end of March showed that 72% were against a return to the Franc.

Can Le Pen Win?

Piggybacking the surge in support for populist movements across Europe, Le Pen has seen a wave of support in this campaign but her path to victory is fraught with significant obstacles though some of these supposed challenges could also afford her opportunity.

Low Voter Turnout Risks

One of the key risks in this election is voter turnout as this ballot is unlike any previous French election. None of the mainstream parties will have a candidate make it through to the second round and consequently, voters are in the unprecedented position of having to choose between two candidates from parties who have not yet held an elected position at national level.

Indeed, in the first round of voting the candidates from the two traditional parties, Hamon for the Socialist Party and Fillon for Les Republicains have seen the lowest voting scores in recent history for these parties. As such, some of their members could feel discouraged from turning out to vote at all which would give a significant advantage to Le Pen. If Le Pen scored over 30% in the first round this would likely rock investor uncertainty and cause a sell-off in European equities and EUR.

Many Unhappy with Le Pen & macron in Second Round

If polls are correct then the second round will be between Macron and Le Pen and for the majority of voters, a vote for Le Pen in the second round is simply not an option. However, many of these same voters might also view Macron as too far from their viewpoint and simply choose not to vote. A such, the risk of unknown voting bias and abstention is extremely high in this election. However, with Le Pen registering more “sure” voters among her supporters, the lower the turnout, the higher her chance of success.

Next Steps

The key indicator at this stage will be the results of the first round: If Macron Wins with a 5% or more lead over Le Pen then markets are likely to show some relief. However, if Le Pen wins this will clearly spook markets and lead to some more risk squaring ahead of the second round of voting.

Technical Perspective

EUR/USD continues to trade within the short-term bullish channel formed since December 2016 lows and has currently bounced off channel support. A win for Le Pen in the first round, especially at 30% or more is likely to see the short term channel break to the downside and price move towards testing the longer term bearish channel low.