French Election "Surprise" Shocks Markets: Euro, Gold Price Volatility and Investment Strategy Adjustments

The "unexpected" results of the French election

July 7 local time, the French National Assembly election held a second round of voting. After the polls closed at 2 a.m. Beijing time on July 8, the left-wing coalition of political parties "New Popular Front" won a majority of seats, a shocking result. In the first round, the far-right National Alliance received 33 percent of the vote, the NPFL 28.5 percent, and the ruling Baath party and its centrist coalition Together 22 percent. However, before the second round of voting, more than 210 candidates from centrist and left-wing parties announced their withdrawal from the election in order to pool their votes and unite against the far-right, a strategy that played a key role in the final result.

Exit polls showed that the far-right National Alliance and allies won between approximately 115 and 150 seats, while the New Popular Front won between approximately 175 and 205 seats without an absolute majority, and the ruling Baath Party and its centrist alliance Together (Together) won between approximately 150 and 175 seats, while the ruling Baath Party and its centrist alliance Together (Together) won between approximately 155 and 205 seats. "The ruling Baath Party and its centrist alliance, Together, won between approximately 150 and 175 seats.

Immediate Market Reaction

The euro took a significant hit when Asian markets opened on Monday. EUR/USD opened sharply lower at 1.0811, then fell to 1.0800, and now recovered slightly to 1.0820, while last Friday's 1.0839. At the same time, the US dollar index jumped higher at 105.12, and last Friday's close of 104.88. Spot gold was also dragged down, opening at 2386.61 US dollars per ounce on Monday, and once fell to 2384.69 US dollars per ounce. 2384.69 U.S. dollars / ounce, currently rebounded to 2387.43 near, on Friday gold prices closed at 2391.28 U.S. dollars / ounce.

Market analysts' views

Audrey Childe-Freeman, Market Strategist, thinks the unresolved political uncertainty premium in France is bad news for the euro. The appointment of the next prime minister will be crucial, and the highly expansionary program of the far-left party France Undeterred will be very negative for French assets and the euro, while the left-of-center Socialist Party is likely to do relatively little damage.

Laurent Douillet, European equity strategist, said that even if the final is a hung parliament, French stocks may fall, because determined to implement the expansionary fiscal and anti-market program of the "new Popular Front" may have more influence in the new government, French bond yields may jump back to the 80 basis points, so that the financial market Pressure on financial markets.

This comes after French markets were already in turmoil in June, with billions of euros evaporating from the market value of equities and bonds, as Macron's snap polls sparked fears that the far-right would come to power.

Thoughts on Investment Direction

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