Win for French anti-EU candidates ‘will devalue euro’

Szu Ping Chan 22 April 2017 • 8:00pm

Marine Le-Pen is just one of the anti-EU French presidential candidates

Investors are braced for a “nightmare scenario” this weekend if the eurozone’s second-largest economy selects two anti-EU candidates to battle for the French presidency.

Currency analysts said the euro would plunge towards levels not seen since the Brexit vote against the pound if Front National leader Marine Le Pen was pitted against Jean-Luc Mélenchon, the communist candidate, on May 7.

With the French presidential election on a knife edge, polls show a four-horse race for the Élysée Palace, with two candidates to go through to the run-off in a fortnight.

Anti-immigration and anti-globalisation candidate Ms Le Pen is widely expected to reach the second round, where she is predicted to face centrist Emmanuel Macron. However, Mr Mélenchon has surged in the polls.

François Fillon, a former prime minister of France, also remains in the race despite a scandal surrounding his British-born wife.

With exit polls tonight released an hour before markets open in Australia, Iain Clark, managing director at Efficient Frontier Consulting, and Saeed Amen, founder of Cuemacro, said currency contracts implied a Le Pen/Mélenchon outcome in the first round “would lead to a 5-10pc decline in the euro against both the US dollar and the pound”.

This would push the euro down to around €1.30 against the pound. Mr Clark and Mr Amen forecast an 8pc to 15pc decline in the euro from current levels if Le Pen wins the second round.

But if Mr Macron and Mr Fillon go through to the second round it would boost the euro by 1pc against other currencies, according to UBS.