The following guest post is courtesy of Jens Chrzanowski, Regional German Director at FCA regulated broker Admiral Markets UK.
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Remember the polls before the US presidential elections? All the polling and news stations, major political and economic figures, possibly even Trump himself, were sure that Hillary Clinton will take the crown. Well, we all know how that prediction turned out.
What about Brexit? The experts promised us a tight race, at the end of which the voters would decide to stay… Their forecast was only half-right — it was indeed a tight race.
But even though the result of Brexit should be clear by now, we’re seeing more and more new developments that complicate the bigger picture. This new UK Parliament election that’s now due in June, for example. Is a British U-turn on its way?
As Mark Twain once said, “It’s difficult to make predictions, especially about the future.” Still, let us try to look objectively at the next “big thing” to hit the political scene, the imminent French presidential election.
As a response to the current political climate, partly fuelled by a number of terrorist attacks within the EU and the UK, it wouldn’t be unreasonable to suggest that the Front National’s leader, Marine Le Pen, may have some silent support. Many go so far as to claim that this silent support may even result in her winning the election. If true, this will surely shake the financial markets on a wide scale — not unlike what happened after the Brexit results were announced.
With things looking like that, responsible Forex & CFD brokers react by limiting leverage options for their clients. In some regulated areas like Cyprus, France, etc., where brokers are obligated to offer a Negative Balance Protection Policy, major events such as this may bring losses not only to traders but also brokers themselves.
So far, French presidential elections have usually constituted two rounds. If no candidate wins a majority in the first round, a run-off election between the top two candidates is held at a later date — in the coming election this will be on 7 May.
But after Brexit and Trump’s victory, all bets are off. Perhaps there won’t even be a second round?! In any case, the markets are unlikely to react strongly to the first election round. Come the second round, however, we might expect extremely large price movements and gaps.
Many brokers, including Admiral Markets, protect their clients by changing their margin requirements around key events, such as elections. For most Forex & CFD brokers, this is a duty. Other brokers — like JFD — also offer regularly updated economic news. After all, there’s no such thing as being “too informed”, especially when the world is moving at breakneck speed.
Time is ticking and it’s important that traders learn as much as possible about the upcoming French election and its potential impact on the Forex & CFD markets.
See you next week!
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Trading on margin carries a high level of risk, and this article should not be seen as advice or solicitation to buy or sell. It’s written for informational purposes only.