GBP: European elections represent potential downside risks – Standard Chartered

In view of the analysts at Standard Chartered, European elections also represent potential downside risks to the GBP as the euro area’s busy political calendar turns to France’s presidential election (April-May).

Key Quotes

“Recent polls put independent centre-left candidate Emmanuel Macron in at least a 10ppt lead over either centre-right candidate Francois Fillon or far-right Front National leader Marine Le Pen, when respondents were asked how they would vote in a second-round run-off. Implied GBP volatility over the election is tracking its EUR equivalent closely.”

“Attention has focused on the potentially disruptive impact of Le Pen on global markets. However, a Macron win could also drive up GBP volatility. The pro-EU candidate has consistently held the line that the terms of Brexit should favour the EU. The GBP-implied volatility term structure is underpricing this risk, in our view.”