The euro notched up its highest level in six months after centrist reformer Emmanuel Macron won the French presidential election on Sunday, neutralizing the biggest political challenge to the currency in its 18-year history.
His far right opponent, Marine Le Pen, had threatened to scrap the euro and reintroduce France’s old money — the franc. Losing its second biggest economy could have spelled the end of the euro.
The euro edged up 0.2% to above $1.10 in early Asia trading, its highest level since November, and made similar gains against other major currencies such as the Japanese yen, British pound and Swiss franc.
Macron, who won about 65% of the vote, had established a clear lead over Le Pen in opinion polls since winning the first round of voting on April 23.
The euro, European stocks, and government bonds all moved higher last week in anticipation of a Macron victory, and that helped explain the muted reaction to Sunday’s vote.
“A lot of move was already baked in, hence the upside for the euro is limited but in the longer term, we could see the price moving near the level of $1.12 to $1.14,” said Naeem Aslam, chief market analyst at ThinkMarkets U.K.
Investors will be hoping Macron’s planned reforms will stimulate growth and employment in France, which has in recent years lagged behind Germany and the U.K.
After years of slow growth, the economy is finally picking up pace but from a very low level. The International Monetary Fund expects France will grow by just 1.4% this year, one of the weakest rates in the EU.
Macron has promised to cut corporate tax rates gradually to 25% from the current 33%. He also wants to make France’s 35-hour work week more flexible, and slash housing taxes for most people.
He has pledged to cut public spending by €60 billion ($66 billion) a year, and plans an economic stimulus package worth €50 billion ($55 billion) over five years.
Analysts said they expected French and European stocks to make gains on Monday.
“Eurozone markets should outperform: we favor our long term calls on Italy and banks,” noted strategists at Societe Generale.