Crédit Agricole CIB macro and rate strategists discuss different political scenarios ahead of the 2027 vote and complement their analysis by simulating the EUR impact under the different scenarios.

"Our results suggest that the EUR could recover under several scenarios including our baseline – eg, either an RN or centrist president coupled with either a centrist or RN majority in the legislature – and some more positive outcomes – eg, a centrist president with either a technocrat, centrist or RN government. We see the OAT, BTP and Bono yield spreads to Bunds tighten notably to push EUR/USD back towards 1.17 or higher, consistent with our current EUR/USD forecasts for 2027," CACIB notes.

"In contrast, should anti-establishment parties to the right or left of the French political spectrum end up controlling both the presidency and the legislature and are able to exercise fiscal restraint, our simulation results point at EUR/USD trading between 1.12 and 1.14.

The most EUR-negative outcomes involve a hung parliament accompanied by either policy paralysis or runaway fiscal deficit. We see EUR/USD falling towards 1.05 under these outcomes," CACIB adds.