Macron's Assumptions and Strategic Decisions Regarding RN Support in National Vote

President Emmanuel Macron's recent decisions have ignited debates about their potential consequences, especially regarding the support for the Rassemblement National (RN) party in upcoming elections. 

EU elections often serve as a way for voters to express dissatisfaction with their governments. Macron might believe that RN's strong showing in these elections is more about protest votes than lasting support. This could lead him to think that RN would fare worse in national elections, where voters focus more on long-term policies and governance. France's parliamentary elections use a two-round system, which can change the outcome significantly. By the second round, the number of candidates drops, making it easier for voters to support fewer parties. This system could hurt RN, especially if left-leaning parties’ team up to reduce RN's influence. Strong left-leaning parties in the polls could further cut into RN's vote share. If these parties can mobilize their supporters and attract centrist voters, RN might end up with fewer votes and seats than they received in the EU elections.

Macron might think that giving RN more power now could weaken their impact in the 2027 presidential elections. By bringing RN into the government, Macron can make it harder for them to campaign solely as an opposition party. This could make it tougher for Marine Le Pen to criticize the government as an outsider, weakening her future position. If RN holds a more significant role in the government, they will share responsibility for current policies and their results. By 2027, voters might blame RN for any negative outcomes, reducing their appeal as a fresh alternative.

Macron's government doesn't have a clear majority in the current parliament, so it needs to work with opposition parties. If RN wins the most seats, they could have a significant influence on the legislative agenda, presenting a strategic challenge for Macron. If RN becomes the largest party, Marine Le Pen might nominate Jordan Bardella, the young party leader, as Prime Minister. Bardella's moderate approach and appeal to younger voters could help RN gain broader acceptance. This would allow Le Pen to focus on her 2027 presidential campaign while keeping RN influential in the government.

Initial analyses suggested that the EU election results would have limited effects on foreign exchange (FX) and interest rates. However, Macron's decision to call a snap election adds new uncertainties, increasing political risk and potentially affecting the euro (EUR). The scenarios for the euro's performance vary: If RN fails to become the largest party, there could be a relief rally for EUR/USD, pushing it towards the upper end of the 1.0500-1.1000 range. If RN becomes the largest party but lacks a majority, policy gridlock could weaken EUR/USD towards the lower end of the current range. If RN wins big and forms a coalition, increased political risk could push EUR/USD down to the 1.0000-1.0500 range.

So, in conclusion we can say that President Macron's strategic decisions are influenced by various factors, including assumptions about voter behaviour in different elections, the impact of voting systems, and the role of left-leaning parties. These strategies come with risks but also offer opportunities to manage RN's influence and maintain political stability. The outcomes of these decisions will significantly affect the political landscape and economic indicators like FX and bond yields, showing how political strategies and market reactions are interconnected.

Sources of idea for this text are POLITICO, POLITICO, EURO NEWS and MUFG (Macron’s bold move – the risks and possible EUR impact)

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.