On Monday during the Asian trading session, the euro reached a two-week high due to the unexpected result of the first round of the French election showing the far-right party in the lead. However, the final outcome remains uncertain, prompting investors to brace for more market volatility.
The National Rally (RN) led by Marine Le Pen was ahead in the first round of the election, as expected, although analysts noted that her party's share of the vote was lower than what some initial polls had predicted.
But uncertainty remains, as the final result will depend on how parties join forces in the 577 constituencies nationwide for the second round of elections, with power-sharing negotiations already underway ahead of next Sunday's runoff.
A poll indicated that the National Rally might secure an absolute majority of seats.
According to LSEG data, the euro has fallen 0.8% since President Emmanuel Macron announced the elections on June 9, but on Monday it rose to a more than two-week high of $1.076175, ultimately climbing 0.4% to $1.075425.
Fiona Cincotta, a senior market analyst at City Index, said, “I think this is a ‘no surprises’ situation, so the market is feeling a sense of relief.”
“Le Pen's vote share was slightly lower than some polls suggested, which might have helped the euro rise slightly at the open.”
This unexpected election has shaken the market because both the far-right and the left-wing alliance, which came second on Sunday, have pledged to significantly increase spending. Given France's already high budget deficit and the EU's advice to take disciplinary action, investors are concerned.
