France holds the first round of its presidential election this Sunday. If no candidate garners more than 50%, a second round run-off vote takes place between the top two candidates from the first round on May 7th. The average of recent polls (as compiled by Bloomberg) suggest far-right candidate Le Pen (who advocates France exiting the European Union and more nationalist immigration and trade policies) has slipped into second place, behind centre-left Macron. Far-left Melenchon and centre-right Fillon are not far behind.
Markets have taken solace in Le Pen’s waning vote share and polls suggesting a Le Pen defeat by a wide margin in the second round triggering relief that a ‘Frexit’ event is becoming less likely. However, with a 30%-40% ‘undecided’ share of the vote, the recent unreliability of polls in ‘Brexit’ and the U.S. presidential election, Melenchon’s rapid poll improvement and Thursday’s terrorist attack in Paris, Sunday’s vote result is far from certain. This leaves Monday’s market reaction all the more likely to break out in either direction and bring geo-political drivers to the fore once again.
Next geo-political test set for this weekend