By Yoruk Bahceli and Amanda Cooper
LONDON (Reuters) – The euro edged higher on Sunday as the first round of France’s shock snap election put the far-right in first place, but gave investors little further clarity on the final outcome.
Marine Le Pen’s National Rally (RN) emerged ahead in the first round, confirming expectations.
But uncertainty prevailed, as the final result will depend on how parties decide to join forces in each of the country’s 577 constituencies for the second round, setting the stage for days of horsetrading before next Sunday’s runoff.
One poll showed the RN potentially winning an absolute majority.
The euro, which has fallen 0.8% since President Emmanuel Macron called the election on June 9, rose 0.21% to $1.0732 as Monday’s Asia-Pacific trading session opened.
“Perhaps the result isn’t as bad as the market had feared,” said Michael Brown, senior strategist at Pepperstone FX, noting that the midpoint of exit poll seat projections of 230 to 310 seats would put the RN just short of an absolute majority.
“The market may be taking a little bit of solace in that. But overall, the downside risks that were there on Friday at the close remain,” Brown said.
The shock vote has rattled markets, as the far-right as well as a leftwing alliance that came second on Sunday have pledged big spending increases. Investors have been alarmed, given France’s already high budget deficit that has prompted the EU to recommend disciplinary steps.
Last week, the premium bondholders demand to hold France’s debt over Germany’s surged to the highest since 2012, during the euro zone debt crisis.
Shares in its big three lenders CAC 40 stock index , which has lost almost 7% .
Attention will turn to bond and stock markets when they open for European trade on Monday.
Markets had initially calmed, as the RN toned down some of its more radical plans and has said it would respect EU fiscal rules that require France to cut its deficit, but were hit again on Friday, as nerves grew ahead of Sunday’s vote.
Economists say it is still not clear how much of the RN’s spending plans are funded.
This post is originally published on INVESTING.
