Even a Le Pen Win Won’t Be Enough to Break Up Euro

Good day forex traders,

with the recent political developments in France and talks of leaving the European Union, a number of traders are apprehensive about the future of the euro currency. France is a major economy of the zone and hence any adverse development is presumed to have a major impact on the EUR/USD. This Bloomberg article however, brings a different perspective. :-

Whatever the outcome of France’s presidential elections, it probably won’t raise the odds of an exit from the euro, most analysts say.

The chances of anti-euro candidate Marine Le Pen winning the second round on May 7 are slim and even if she does, the National Front party leader is unlikely to get a majority in the legislative vote in June, according to banks including Barclays Plc and UniCredit SpA. Without strong support in Parliament, her ability to push for a referendum on the country’s membership in the currency union will be limited, according to most currency strategists and economists.

Nevertheless, a Le Pen victory can’t be ruled out and would spark a capital flight from France and peripheral euro nations such as Italy, Commerzbank AG says. The common currency slid 1.5 percent against the dollar this week on the mounting political concerns , while Credit Agricole SA and Morgan Stanley advised clients to sell the euro. Below is a compilation of economists’ and strategists’ views: Credit Agricole SA

The polls suggest that Le Pen will lose at the second round to either Macron or Fillon and this can explain the relative resilience of the euro of late, London-based strategist Valentin Marinov said in e-mailed comments on Feb. 9. “This may be misleading, however, and we advise cautiousness,” he added

Still, a victory for Le Pen shouldn’t automatically translate into a French exit from the euro zone. “An exit would be a long and complex process” as it would require a constitutional amendment, Marinov added

The bank assigns a 35 percent chance to Le Pen winning in the second round of elections, in line with polls

Barclays Plc

The chances of Le Pen winning the second round of the presidential election are “very, very small”, unless Benoit Hamon or Jean-Luc Melenchon qualifies against Le Pen, London-based economist Francois Cabau wrote in e-mailed comments

“In any case, her party is extremely unlikely to come remotely close to […]

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