The euro jumped to a five-month high last night after Emmanuel Macron took the lead in the race to become France’s next President.
Centrist hopeful Macron will face far-right candidate Marine Le Pen in the final round of voting on 7 May..
With 40m votes counted last night, French interior ministry figures had former investment banker Macron with 23.5 per cent of votes and Len Pen on 22.3 per cent.
An earlier exit poll Macron had won 23.7 per cent of the vote, above Le Pen's 21.7 per cent, pushed the euro up two per cent to $1.09395, reaching its highest point since November last year.
“With Macron heavily favoured in head-to-head polling against Le Pen, it seems most likely that the negative market scenarios – priced in over recent weeks – will recede between now and the run-off,” said Timothy Graf of State Street Global Markets.
State Street Global Advisors' Bill Street added: “Le Pen will almost certainly be defeated in two weeks' time, and equities can continue to rally going into 2018 as non-existential risks can be absorbed.”
Shortly before 11pm UK time last night, Melenchon was the only candidate who had refused acknowledge Macron's likely win.
German Chancellor Angela Merkel welcomed the Macron success. Her spokesman Steffen Seibert tweeted: “It's good that Emmanuel Macron was successful with his course for a strong EU and social market economy. All the best for the next two weeks.”
“Markets will view this as a positive outcome as it suggests that Macron’s margin in the second will be even stronger than polls have suggested going into tonight’s vote,” said Claus Vistesen, chief Eurozone economist for Pantheon Macroeconomics.
“Based on these estimates, the odds overwhelmingly suggest that Macron will be the next president of France, but now awaits a tough campaign against Le Pen, and anything is still possible.”
The other two frontrunners, centre-right Francois Fillon and hard-left Jean-Luc Melenchon, polled 19.5 per cent each. Beneath them came Benoit Hamon on 6.2 per cent.
Fillon and Hamon later endorsed Macron, conceding defeat. Melenchon said he would not comment until the official results are out.
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Jeremy Cook, chief economist at the international payments company, World First, said:
The two biggest sighs of relief tonight are coming from French pollsters and the European single currency. [The euro] is indicated to open around 1.5 per cent higher when the markets fully open in a couple of minutes or so.
This positivity is mainly as a result that if there was one match up that the anti-EU Le Pen did not want in the 2nd round it is Macron. There has not been a poll that puts her within 15 per cent of Macron in the 2nd round and so, save the most stunning failure of political polling in history, you have to think that Emmanuel Macron will be the French President in a fortnight’s time.”
The Eurozone’s single currency was up around 1.5 per cent on the news, trading just short of $1.09 against the US dollar early today, having touched its highest level since November last night.