logo-societe-generaleThe first round of the French Republican Party primaries saw Nicolas Sarkozy knocked out and Francois Fillon go into the second round with Alain Juppe after getting 44% of the vote. That will leave him firm favourite, not just for his party’s nomination but also for the Presidential Election in April/May. Is it the right time to buy EUR?


The European open has seen a wave of Euro short-covering but how far that can go is doubtful. The clearest message we received over the last two weeks was that opinion polls and historical voting patterns which suggest a le Pen victory is unlikely, won’t do much to ease pre-election nervousness. Market participants can see the shift in the voter mood and the sharp swing in support for M. Fillon can be seen as yet another surprise for opinion pollsters. Uncertainty will weigh on the Euro for months to come. Meanwhile, the final opinion polls before the deck 4 constitutional reform referendum in Italy, show the ‘No’ side in the lead.

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With Thanksgiving on Thursday, this will be a reduced week, which may be a recipe for short-covering. But if the euro does bounce, we would rather be long EUR/JPY or EUR/GBP than EUR/USD. Asian equities are up this morning and a quiet week would not seem a likely backdrop for a yen bounce.

eurjpyh1With relative yields and the global risk mood bother favouring yen weakness, EUR/JPY can have a short-term rally, and indeed, in the faraway future when the French elections are behind us, long EUR/JPY looks like a very attractive long-term long trade.

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