Daily Management Review

If Le Pen Wins In France, The Euro Could Hit A 15-Year Low


If Le Pen Wins In France, The Euro Could Hit A 15-Year Low
According to a recent survey conducted b a firm on economists, the immediate reaction in the euro is similar to that seen in the pound following the U.K.’s Brexit vote ad predicts that the currency will tumble to a 15-year low if Marine Le Pen becomes French President.
According to 23 of 38 respondents in a Bloomberg survey, within a day after a victory for the National Front leader, the shared currency would drop to $1 or below  and among these  economists,, five of them predicted that the fall would reach a level of below 95 U.S. cents due to the decline.  Since the anti-European Union candidate has threatened to call a referendum on the euro and of re-denominating the nation’s debt, hence a Le Pen victory is seen causing such a rapid decline.
While a move below 95 cents would represent a decline of around 12 percent, a decline to parity for the first time since 2002 would be a fall of more than 7 percent from the current level of about $1.08. Such a move would reinforce an emerging trend of currencies taking the strain for political upheaval and would mirror the reaction seen in the pound following the U.K.’s decision to leave the EU.
In a call that was borne out after the vote as the pound slumped more than 10 percent to a 31-year low of $1.3229,  the majority of economists forecast a drop below $1.35 in the event of a decision to leave in a similar survey before the Brexit referendum last year.
“The market reaction would be very negative since re-denomination risks have been priced in only to a very modest extent,” said Frederik Ducrozet, an economist at Banque Pictet & Cie in Geneva, who expects the euro to drop below parity after a Le Pen victory.
However,, compared with just 20 percent for Le Pen, economists who participated in the survey by Bloomberg accorded a 61 percent probability that independent candidate Emmanuel Macron will become the next president and hence it is anticipated that a Le Pen victory is seen as unlikely. According to a rolling daily poll by Ifop released Friday, Macron is seen gathering up to 26 percent of the vote in the first round of the election in April. According to the poll Le Pen would be eaten by the independent candidate in May’s second round by 61.5 percent to 38.5 percent.

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