French Elections – First Round Preview
The first round of French lower house elections happens this Sunday 30th, whereby parties compete in the 577 constituencies for votes. In the case of no absolute majority, all parties with at least 12.5% of registered voters advance to a second round on 7th July. Latest polls indicate 33-35% for Le Pens’ RN, 26-29% for NFP and 18-22% for Macrons’ ENS. Voter turnout will be crucial and is projected to be as high as 65% this year, versus only 47% in 2022. A higher turnout makes it more likely that three parties advance to the second round, which in turn should favour Le Pen given the current polls. The current base case is a relative majority by Le Pen, coexisting with Macron as President. The RN has moderated their Eurosceptic stance, but fiscal policy is likely to be easier.
UK – Dovish BoE to cut rates post-election
The BoE held rates as expected with an unchanged 7-2 vote, amid the ongoing campaign for elections on July 4th. Part of the committee voting to hold rates described the decision as finely balanced, despite services inflation repeatedly beating to the upside. Our base-case is now for a first cut in August, currently priced at a 50-60% probability.
Polls currently see Labour at 36-46%, Tories 15-25%, Reform UK 13-19% and LibDems 8-14%, whereby the Tories are losing votes amid the betting scandal and rising Reform UK popularity.
Algebris Investments’ Global Credit Team
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