Marine Le Pen’s National Rally has emerged as the front-runner in the French legislative elections with 33% of the votes, leading to a potential hung parliament. Analysts predict moderate fiscal policies and reduced market volatility as the most likely outcome of the election.
The first round of elections saw National Rally leading over the left-wing bloc and President Macron’s centrist alliance. The possibility of forming France’s first far-right government since World War II is looming, with Jordan Bardella poised to become Prime Minister. However, the likelihood of an absolute majority for the far-right remains uncertain.
Market reactions have shown cautious optimism, with the French CAC 40 Index jumping more than 2% but eventually settling at a 1.3% gain. Analysts point to a 55% chance of a hung parliament, which would hinder significant legislative changes and prevent major fiscal imbalances.
BBVA’s chief strategist Alejandro Cuadrado highlighted potential headwinds for the Euro in the event of a far-right majority. However, a lack of absolute majority in the first round has boosted the EUR/USD, indicating a shift in sentiment toward the single currency.
Danske Bank analysts predict that a hung parliament is the most likely outcome, with minimal increases in public spending. In case of a left-wing coalition victory, increased spending and potential confrontations with the EU could lead to market concerns.
As the nation prepares for the second round of voting on July 7, the final results will determine the direction of French fiscal policy and market stability. While National Rally remains in the lead, the outcome of the election is far from certain.
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