Unlike in 2017, investors haven’t had to fret this year that French presidential elections would result in “Frexit”. If opinion polls are right, they don’t need to worry either that far-right candidate Marine Le Pen may win Sunday’s runoff vote.
Incumbent Emmanuel Macron, who has led the euro area’s second-biggest economy for five years, enjoys a 12-point lead over Le Pen, and emerged the stronger candidate after a key TV debate.
French bond yield premia over top-rated Germany are stable as is the euro, unlike in 2017 when Le Pen espoused ditching the single currency.
Still, a Le Pen presidency, which would trigger a constitutional crisis, has never been closer. And even if Macron wins, he cannot count on a majority in June’s parliament election.
So, the real test for markets may be yet to come. And history shows opinion polls can get election outcomes wrong.