NOMURA: Macron could send the euro to $1.15

LONDON — The euro could move as high as $US1.15 following centrist candidate Emmanuel Macron’s win in the first round of France’s presidential election on Sunday, according to analysts at Nomura.

The currency rallied sharply overnight as the results came in, and remains up by more than 1% to trade at around 1.084.

Macron — the most pro-EU candidate on the ballot — won 23.8% of first round votes. Far right, anti-EU candidate Marine Le Pen came second, with polls suggesting that Macron should win the final round comfortably next month.

With the threat of a far right-wing government in France receding, the euro crash that would have accompanied it is also much less likely.

“This matters as the market has embedded a risk premium in both EUR and OATs for some time now heading into this election. We expect that premium to nearly completely come out of the market pricing and this should see EUR/USD finish above 1.09 on the day and we expect this to continue and are entering a long EUR/USD position,” Nomura’s Jordan Rochester said.

The focus will then shift to the European Central Bank, which may begin to tighten monetary policy as risk begins to recede.

“We expect EUR to open materially higher and for the move to continue as EUR has been underpriced owing to the election premium. But also incoming inflationary pressures in the euro area and a less-accommodative ECB should benefit the EUR. We are therefore entering into a long EUR/USD position and will look to reassess at 1.15,” he said (emphasis ours).

Here is the chart:

See the latest EUR-USD movements here.

NOW WATCH: Scott Galloway on the biggest thing in tech in 2017: Amazon could eliminate the existence of brands with voice technology

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.