Source: Bloomberg

Next week’s French elections have every foreign exchange trading desk gaming the odds on the moves in the Euro depending on outcomes. With 25% of French voters undecided and opinion polls in discredit after the Brexit and Trump election surprises, uncertainty is through the roof — as measured by the implied volatility of options on the Euro-US dollar exchange rate.

Wall Street chatter puts the worst outcome for the Euro on a first-round victory by National Front candidate Marine Le Pen and leftist candidate Jean-Luc Melenchon, the two anti-European contenders. The best outcome for the Euro would be a runoff between the neophyte centrist Emmanuel Macron and Le Pen. But there are too many factors to game.

As Italy’s Il Foglio observed this morning, Macron was supposed to be the centrist who united the conventional parties against Le Pen. Macron, though, has produced a “short circuit,” with all the other candidates concentrating their fire on the 39-year old former economics minister. If the Macron bubble pops, the victor could be either the conservative Catholic free-marketeer Francois Fillon or the hard leftist Melenchon — and an unpredictable runoff against Le Pen.

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