Countdown to Sunday's Volatility

First there was Brexit, then Trump and now it's the French election; or at least that's the narrative playing out in the markets. We take a closer look. The Premium Insights closed the EURCAD long at 1.4495 for a 235-pip gain in order to make a way for a tactical dual EUR trade on Friday ahead of Sunday's French elections.

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Polls showed fractional momentum for Macron, helping to boost the CAC-40 in countdown mode to the Sunday's 1st round vote. That uptick may be telling because a large number of voters said they were undecided earlier in the month.

A poll from Harris showed Macron at 24.5%, Le Pen at 21%, Fillon at 20% and Melenchon at 19%. Given the margin of error and other factors like turnout and undecideds, it's conceivable the second round could be the far right candidate Le Pen and the far left candidate Melenchon. Polls show Melenchon would win that contest but German Fin Min Schaeuble called it a 'nightmare scenario' because both are euroskeptics.

What's important to remember is that's a highly unlikely scenario and the only result that could immediately upend the euro. If Macron finishes in the top-two and moves to the runoff, he's heavily favoured against any of the candidates. Fillon would also be a big favorite against Le Pen or Melenchon.

So while the market sees this as a potential redux of Brexit or Trump, it would take a far bigger swing. Brexit polls were close in the days ahead of the vote and Trump lost the popular vote but won the electoral college. In France, it's a national popular vote so polling is simplified.

That said, there is always the risk that voters are playing coy with pollsters again or could swing late. The risks may be even higher after what looked like a terrorist attack on the Champs Elysee late Thursday. That alone could add to jitters Friday.

After talking with many traders and analysts, there is a distinct fear of history repeating itself but those fears (and market pricing) overstate the odds of a major surprise.

Sunday Afternoon Volatility

Before that, we'll watch for continue comments from leaders at IMF meetings in Washington and the Japan Nikkei PMI at 0030 GMT. The prior was 52.4.