France's 2027 presidential election is emerging as a major risk for the euro, with new analysis highlighting the potential for significant shifts in fiscal policy and European relations depending on the outcome
The euro is entering a period of heightened political risk as France prepares for its next presidential election, scheduled for April and May 2027. According to a report from Goldman Sachs, the outcome of this vote could have far-reaching consequences for the euro's stability, fiscal policy in France, and the broader direction of European integration. The bank's analysis, based on current polling data and scenario modeling, suggests that Marine Le Pen is the frontrunner, with a 68% probability of winning the presidency. However, the range of possible institutional outcomes remains unusually wide, making it difficult for markets to price in the full spectrum of risks.
The first round of the French presidential election is set for 18 April 2027, with a potential runoff on 2 May if no candidate secures an outright majority. Goldman Sachs has moved beyond treating individual polls as forecasts, instead converting them into conditional probabilities for various scenarios. While Le Pen leads the field, former prime minister Édouard Philippe and Jean-Luc Mélenchon are each estimated to have a 35% chance of reaching the second round, reflecting the fragmented nature of the political landscape.
Presidency Alone May Not Decide Euro Direction
Winning the presidency is only part of the equation for France's future policy direction. The ability of the next president to secure a working majority in the National Assembly will be critical for implementing fiscal and European policies. Goldman Sachs estimates that, if Le Pen wins, there is a 56% chance her National Rally party could achieve an outright parliamentary majority, a 24% chance of forming a coalition with the centre-right, and a 19% probability of a hung parliament. Across all modeled scenarios, the likelihood of a Le Pen presidency combined with a parliamentary majority stands at 39%.
Other possible outcomes include a hung parliament (26% probability), a centrist president with a majority (14%), and a Mélenchon presidency with a majority (3%). These figures highlight the complexity of the French political system and the potential for divided government, which could constrain the president's ability to pursue significant changes in fiscal or European policy. As a result, the headline probability of a Le Pen victory does not automatically translate into a clear direction for the euro, as the composition of the National Assembly will shape the policy environment.
Market Implications and Euro Forecasts
Goldman Sachs advises investors to pay close attention to the evolution of Le Pen's economic and European policy proposals as the campaign unfolds. The bank notes that the most consequential scenario for markets is one in which the presidency and parliament are controlled by the same political force, enabling more decisive policy shifts. However, the probability of such alignment remains below 40%, underscoring the persistent uncertainty facing the euro as the election approaches.
Despite these political risks, professional sentiment on the euro remains moderately positive. According to Exchange Rates UK's forecast survey, the median EUR/USD exchange rate is expected to reach 1.15 in the third quarter of 2026, 1.165 in the fourth quarter, and 1.18 by the second quarter of 2027. These forecasts are based on current market data, official economic releases, and published bank research, and do not yet reflect a decisive shift in expectations due to the French election. However, the election is seen as the key event that could widen the range of possible outcomes for the euro in the coming years.
For context, recent periods of political uncertainty in major eurozone economies have often led to increased volatility in the EUR/USD exchange rate. For example, in the weeks leading up to the 2022 French presidential election, the euro weakened by approximately 2% against the US dollar as investors weighed the risk of policy change. While the current consensus remains constructive, the 2027 election is already being watched as a potential turning point for the currency.
Comparing Political and Economic Drivers
Political developments are not the only factors influencing the euro's trajectory. Broader economic trends, such as inflation, monetary policy decisions by the European Central Bank, and global risk sentiment, continue to play a significant role. As highlighted in a recent article on major currency stability ahead of key US inflation data, market participants often weigh multiple sources of uncertainty simultaneously. The interplay between domestic politics and international economic conditions will be especially important as France's election draws nearer.
Looking ahead, the euro's path will depend not only on the outcome of the French presidential and parliamentary votes, but also on how markets interpret the likely policy mix that emerges. Investors and policymakers alike will need to monitor both the evolving political landscape and the broader macroeconomic environment to assess the risks and opportunities facing the single currency.
France's political system is characterized by a two-round presidential election and a separate parliamentary vote, which can produce divided government. In such cases, the president may be forced to compromise with a parliament controlled by a different party or coalition, limiting the scope for unilateral policy changes. This institutional structure is designed to balance executive and legislative power, but it can also introduce uncertainty for markets and for the euro, especially when the political landscape is fragmented. Understanding these mechanisms is essential for interpreting the potential impact of the 2027 French election on the euro and on European fiscal policy more broadly.
