Macron election call causes market chaos: Pound reaches highest level against euro in two years
Pound sterling rose above €1.18 against the common currency following Emmanuel Macron’s shock decision to call early elections in France.
The euro fell to an almost two-year low against the pound yesterday after markets were stunned by Emmanuel Macron’s shock decision to call early elections in France.
The pound sterling rose above 1.18 euros against the common currency to reach its highest level since August 2022 after the French president’s move, which followed a painful performance for his party in the European Parliament vote.
Stock markets across the continent were also shaken, with France’s Cac 40 falling to its lowest level since February.
Macron’s decision to call early parliamentary elections came after his Renaissance party was defeated in the European elections by Marine Le Pen’s far-right National Rally.
Mood: The euro fell to an almost two-year low against the pound yesterday as markets were stunned by Emmanuel Macron’s shock decision to call early elections in France
This gamble could see the president working with a National Rally prime minister responsible for the domestic agenda, including economic policy.
The Paris Cac 40 ended 1.3 percent lower, with banks particularly hard hit.
BNP Paribas fell 4.8 percent, Credit Agricole lost 3.6 percent and Societe Generale plummeted 7.5 percent.
Elsewhere in Europe, Germany’s Dax and Italy’s FTSE MIB fell 0.3 percent each. In London, the FTSE 100 fell 0.2 percent.
Meanwhile, yields on French 10-year government bonds – the yield investors demand for government loans – reached their highest level in seven months. Yields on Italian government bonds rose to their highest level in six months.
Le Pen’s agenda proposes higher government spending despite already high public debt, threatening to increase financing costs for French lenders.
Analysts said a victory in the National Rally could also mean a drain on bank profits.
A coalition of moderates from across the continent appeared poised to retain a majority in the European Parliament.
However, there were large gains for the Eurosceptic parties, raising doubts about the ability of the major powers to implement large-scale policies.
In Germany, Europe’s largest economy, members of the fragile coalition led by social democrat Olaf Scholz faced major gains from the far-right Alternative for Germany.
Scholz was also subjected to a fierce tirade from the head of the German stock exchange.
Deutsche Boerse boss Theodor Weimer said a “lack of leadership” from the chancellor was putting off international investors from Germany and that the country was “economically on its way to becoming a developing country.”