Euro Upside on Macron Win to be Brief says de Vere Group's Green

Above: A file image of Emmanuel Macron © European Union.

Euro exchange rates are unlikely to reap any lasting gains on the back of news Emmanuel Macron was reelected president of France on Sunday according to an analyst.

Macron secured 58.5% of the vote, beating rival Marine Le Pen.

While Macron's win was largely expected by markets the closing out of any hedges on a surprise will offer some initial uplift to the Eurozone's single currency.

The Euro 'gapped' higher against the Pound, but actually opened lower against the Dollar.

Gains were nevertheless recorded against the majority of the Euro's G10 peers.

"European markets and the euro are likely to experience a relief rally on Macron’s re-election and his pro-business, pro-Europe agenda," says Nigel Green, CEO of de Vere Group.

Green says markets have been spared the shock and uncertainty that would have sent them into a tail-spin should Le Pen have won, as she would have put France on a very different course.

“But this could be short-lived, especially as his win was largely already priced-in by the markets," says Green.

The Euro-Pound exchange rate gapped up to open higher at 0.8407 on Monday, the Euro-Dollar exchange rate opened at 1.0799.

“As the news sinks in, attention will move to other pressing geopolitical matters that will weigh on global markets, says Green.

Green says the markets will breathe a collective sigh of relief – albeit briefly - with the likely outcome of the presidential elections in France.

“The election is of major importance beyond France’s border and the outcome has international implications. The country is the second-biggest economy in the European Union, the only one with a UN Security Council veto, and its sole nuclear power," he says.

Despite Macron's win the far right still managed to secure their largest vote share ever, while voter turnout was near record lows.

"Markets have avoided the upset of a Le Pen win, but investors must not become complacent. There remain major global headwinds that could negatively impact returns. That said, volatility always brings enhanced investment opportunities," says Green.

Any upside potential offered to the Euro by Macron's win could rapidly be overtaken by other pressing matters facing investors which could ultimately benefit the Dollar.

“Investors will focus on the worsening Covid situation in China, the world’s second-largest economy. The Asian powerhouse is facing its worst Covid outbreak since the start of the pandemic in late 2019, as it locked down major cities like Shanghai," says Green.

Risk appetite looks to be poor after the People’s Bank (PBOC) rejected the opportunity to lower its policy rates today, despite the sharp economic downturn and recent calls from Beijing for monetary support.

"Other triggers for low market sentiment include ongoing red-hot inflation, interest rate hike expectations from most key central banks, and the continuing global uncertainty created by the Russian-Ukrainian war," says Green.