Investors have retreated from positions on French bonds, and the euro has dropped in value the morning after Sunday’s parliamentary elections in France.
France.
The euro fell slightly—by 0.3% against the dollar—in the hours following the election result. The leftist New Popular Front coalition came out on top, beating President Emmanuel Macron’s party and the right-wing National Rally, but failed to win an outright majority.
This leaves investors pondering who will lead the government and what the result will mean for the economy.
"There's really going to be a vacuum when it comes to France's legislative ability," Simon Harvey, head of foreign exchange analysis at Monex Europe, told Reuters.
The price of French government bonds fell, and the CA40 index of the largest companies on the Paris stock exchange was down in early trading.
"Emmanuel Macron should today officially invite the New Popular Front to nominate a prime minister," said French Green leader Marine Tondelier.
"Will he or won't he? As this president is always full of surprises, we'll see," she said in a radio interview cited by Reuters.
Today’s market reaction erases some of the gains that markets made after the first round of the French elections. Last week, there was relief among investors that the far-right had not done better in that round, with many seeing a hung parliament as a better prospect for markets than populist policies.
Now analysts are suggesting that a political impasse could affect the economy. If a coalition led by the NFP takes power, there is a risk that some of Macron’s reforms aimed at cutting public expenditure could be reversed, while pay hikes for government employees promised by the left during the elections could put further pressure on the budget deficit.
Meanwhile, it remains undecided as to which leader from the numerous factions within the leftist NFP grouping will attempt to form a government. According to Le Monde, many see Jean-Luc Mélenchon, who has been the NFP’s figurehead during its election campaign, as “too divisive.”
On Sunday in Paris’s Stalingrad Square, often the venue of union demonstrations, Mélenchon said an NFP government would quickly get its economic policies passed “by decree,” as Marcon’s party had done with some of its economic policies that had not initially been supported in Parliament.
However, the France 24 website noted that center-left politician Raphaël Glucksmann “publicly called on his allies to act like grown-ups” and to be more sensible in their policy making.
The złoty lost 0.12% against the euro on Monday, dropping to 4.28 zł. The Polish currency also weakened against the dollar by 0.19% to just over 3.95 zł.
This leaves investors pondering who will lead the government and what the result will mean for the economy.
"There's really going to be a vacuum when it comes to France's legislative ability," Simon Harvey, head of foreign exchange analysis at Monex Europe, told Reuters.
The price of French government bonds fell, and the CA40 index of the largest companies on the Paris stock exchange was down in early trading.
"Emmanuel Macron should today officially invite the New Popular Front to nominate a prime minister," said French Green leader Marine Tondelier.
"Will he or won't he? As this president is always full of surprises, we'll see," she said in a radio interview cited by Reuters.
Today’s market reaction erases some of the gains that markets made after the first round of the French elections. Last week, there was relief among investors that the far-right had not done better in that round, with many seeing a hung parliament as a better prospect for markets than populist policies.
Now analysts are suggesting that a political impasse could affect the economy. If a coalition led by the NFP takes power, there is a risk that some of Macron’s reforms aimed at cutting public expenditure could be reversed, while pay hikes for government employees promised by the left during the elections could put further pressure on the budget deficit.
Meanwhile, it remains undecided as to which leader from the numerous factions within the leftist NFP grouping will attempt to form a government. According to Le Monde, many see Jean-Luc Mélenchon, who has been the NFP’s figurehead during its election campaign, as “too divisive.”
On Sunday in Paris’s Stalingrad Square, often the venue of union demonstrations, Mélenchon said an NFP government would quickly get its economic policies passed “by decree,” as Marcon’s party had done with some of its economic policies that had not initially been supported in Parliament.
However, the France 24 website noted that center-left politician Raphaël Glucksmann “publicly called on his allies to act like grown-ups” and to be more sensible in their policy making.
The złoty lost 0.12% against the euro on Monday, dropping to 4.28 zł. The Polish currency also weakened against the dollar by 0.19% to just over 3.95 zł.
Source: TVP World, Le Monde, France 24
