EUR: FX Options Prices Got It Wrong On French Elections – Barclays

In contrast to what FX options prices suggest, we see the French election as a low-risk event and under our baseline scenario, a positive for European unity and the EUR.

Both electoral history and polls strongly suggest this outcome. As outlined, the risks of an election victory by Front National leader Marine Le Pen appear to be extremely low. Rather, polls indicate, despite some recent erosion of initial support, the most likely outcome to be a victory by centre-right Republican candidate François Fillon with a good chance of a supporting Republican majority in the lower house.

This combination is likely to be good for reform prospects in France, for re-establishing positive momentum in the EU, and potentially for leading to a more amicable outcome in Brexit negotiations. Latest developments relating to Front National party election financing issues, a judicial case reviewing previous campaign accounts irregularities and increasing internal dissent suggest increasing chances (from a high level) that Mrs Le Pen may not even make it to the second round.