FX Focus: Euro surges to three-week high after polls place Macron in lead in French elections

The euro climbed to a three-week high against the dollar on Thursday (20 April), after a new opinion poll suggested Emmanuel Macron will win the French election.

By early afternoon, the common currency was 0.36% higher against the dollar, trading at $1.0750, and was on track for its highest close since 27 March. The euro also edged 0.11% higher against the pound, fetching 0.8392p.

The euro surged after a poll from Harris Interactive placed Macron on 25% support ahead of Sunday's first round of voting, ahead of Marine Le Pen with 22% of preferences, followed by Republican candidate Francois Fillon and left-winger Jean-Luc Melenchon.

"The outcome of the French Presidential election means that Sunday's result could have a major impact on the euro," said Kathleen Brooks, research director at City Index.

"There is a chance that the market has been wrong-footed once again by the polls, and Le Pen is not guaranteed a spot in the second round.

"If we are correct, then the political premium that has kept the euro range bound in recent months could evaporate, allowing the single currency to stage a decent rally on the back of a victory for the two moderate, pro EU candidates on Sunday night."

However, FXTM research analyst Lukman Otunuga warned against relying too much on opinion polls, particularly in the wake of the US elections and of the Brexit referendum in June last year.

"Although the euro has continued to display resilience against pre-election jitters, investors should be under no illusion that this has to do with a change of sentiment," he said.

"The threat of Marine Le Pen winning the election remains live, and the risks associated with such a victory may ensure further downside pressures on the euro."

Over in Britain, notwithstanding the slight retreat against the euro, the pound held steady against the dollar, climbing 0.14% to $1.2798, after Prime Minister Theresa May's motion to held a snap General Election on 8 June was overwhelmingly backed by MPs.

"To many the appreciation of the pound seems counter-intuitive, yet the prospect of a strengthened Tory majority means there is hope that this election could be good for the UK in Brexit negotiations," said IG's analyst Joshua Mahony.