The rise of “French Trump”, Éric Zemmour, to weigh on the euro – Nordea

More and more stories are emerging on the “French Trump”, Éric Zemmour. How will markets react if Eric Zemmour starts gaining even further momentum in polls? Economists at Nordea believe that markets will position for “doomsday” in French assets into the election, which will be reversed quickly after the actual election.

The French election matters for positioning

“French bonds sold-off markedly versus peers into the election in 2017 when Marine Le Pen carried momentum into the election. This goes to show that ‘fearmongering’ in the media actually works to scare of positioning, why we would envisage a similar or even larger positioning effect should the media truly start to believe that there is a risk of Eric Zemmour winning the presidential outing.”

“The EUR will likely suffer versus peers from such a positioning flow (due to Japanese and US investors closing down French positions), while French-German spreads will widen and moreover we could see a further tendency towards intra-European haven seeking with EUR/CHF, EUR/DKK and EUR/SEK under downside pressure should Zemmour’s current polling trends intensify. Ultimately, these positioning trends will likely reverse immediately after the second election round, even if Zemmours wins, but we will not get there without substantial fearmongering ahead of it.”

“We are yet to see any France negative flows, why the story is most likely still non-consensus.”