The Euro Pound (EUR GBP) exchange rate rallied from its worse levels yesterday as the most recent polling data helped to allay investor fears over the upcoming French Election.
The latest poll from Harris Interactive suggests that independent candidate and current frontrunner, Emmanuel Macron is expected to gain 25% of the vote, 3 points ahead of his main rival, far-right Eurosceptic, Marine Le Pen on 22%.
With the two other main candidates Francois Fillon and Jean-Luc Mélenchon both polling around 19%, the data has done much to quell some of the uncertainty seen over the weekend as previous polls suggested a far closer race, with any of the four top candidates possibly able to make it to the second round of voting.
EUR GBP rose as markets also became increasingly optimistic that the French electorate will band together, crossing party lines to vote for either Macron or Fillon in order to prevent a victory for Le Pen’s Nation Front should she make it to the second round.
Kit Nicholl, country risk analyst at IHS Global Insight said;
‘In a scenario where Le Pen is pitted against Fillon, or more likely, Macron, voters from the moderate left and right are likely to unite in a so-called ‘Republican front’, voting tactically to keep the FN out of power. A Le Pen victory is therefore unlikely but still remains possible, particularly as abstention rates will also play a big role.’
However a possible run-off between Le Pen and Mélenchon remains a major concern for EUR investors as the ‘nightmare scenario’ would see two Eurosceptic candidates go head to head, with both promising to hold a referendum on EU membership should they be elected.
Meanwhile the Pound remains in a position of strength this morning following the vote in the House of Commons to back Prime Minister Theresa May’s call for a snap general election on the 8th of June.
Investor expect that the early election will help to shore up May’s position ahead of Brexit negotiations as the Conservatives are expected to overwhelming defeat labour, gaining a larger majority in Parliament and granting the PM with the mandate to pursue her plans to leave the single market.
The most recent polls show that the Conservatives enjoy a 24 point lead over Labour and while Jeremy Corbyn has vowed to ‘overturn the rigged system’ and beat the polls, he will have his work cut out for him if he is to catch up with the Tories.
Looking ahead the GBP EUR exchange rate may advance later this afternoon following the release of the Eurozone’s latest Consumer Confidence flash, with analysts predicting that it will rise from -5 to -4.8 in April, although there are some fears that household sentiment could be negatively impacted by the uncertainty of the French election.
Meanwhile the Pound may relinquish some of it recent gains on Friday as the UK releases its latest Retail Sales figures, which are forecast to have plummeted from 1.4% to -0.2% in March, thanks to Easter falling later in the year in 2017.
Current Interbank Exchange Rates
At the time of writing the EUR GBP exchange rate was trending around 0.83 and the GBP EUR exchange rate was trending around 1.19.