Uncertainty Ahead of French Election

Polls show a small gap between the front runners with National Front leader Marie Le Pen tied with François Fillon. A populist win would be a threat bigger than Brexit to the Euro and the EU. Frexit is a possibility along with dropping the Euro and moving to a “nouveau franc” to make exports competitive. National debt would convert to the new currency which would likely be a default. There is high anxiety about the election since polls were wrong about the US Presidential election and Brexit.

The Euro has been on a one month slide against the Japanese Yen. This indicates that Japan is a safer economy than Europe. The Euro recently recovered against the Yen, but is facing resistance. This may change if Marie Le Pen begins to slip in the polls.



There has also been as safe flight to the US Dollar over the past month.


Along with increased demand in the 10-year Treasury Note.

US-T 10Y
10 Year US Treasury

US companies doing business in France have FX exposure the Euro and potentially high impact exposure to introduction of a devalued currency. US companies may wish to insure accounts receivable against further erosion through forward contracts, futures, or options.