2017: The year of European politics - SocGen

Kit Juckes, Research Analyst at Societe Generale, expects that the Front National candidate Marine Le Pen seems very likely to make it to the second round of France’s presidential elections on 7 May 2017, but she is unlikely to prevail in a two-candidate showdown.

Key Quotes

“The tailwind behind populist and anti-establishment politicians, however, is likely to scare buyers away from the euro until after the election, unless opinion polls show a very clear outcome. On that basis, despite the strong economic case for the euro to start bottoming out earlier, we expect to see EUR/USD reach parity in 1H, and to rise on gradually in 2H. However, a stronger move is possible in 2018, after the German and Italian elections.”

“Euro beats yen. EUR/CHF and EUR/GBP trends are likely to mirror EUR/USD (down, then up), but EUR/JPY can maintain its steady rise as JGB yields remain (relatively) capped. That said, we expect the euro to underperform the Norwegian krone and Swedish krona through 2017.”