Heightened French political risk and policy uncertainty, reflected by a jump in sovereign yields and a weaker single currency, are clouding a scheduled ratings review by Moody's, economists and currency strategists told CNBC.
Moody's rates French government debt at Aa2, the third-highest investment grade ranking, but some are not ruling out a cut in the outlook to negative from stable. Others, however, said they believe such action is unlikely until after the conclusion of the French presidential elections and a clarification about the winner's economic platform and commitment to the European Union.
"The experience from similar episodes is that a country will be put on a negative outlook, but not downgraded until the worst is confirmed," said Benat Onatibia, macro strategist at Vanda Securities. "That's what happened with DBRS on the Italian referendum. Hence, we see it as highly unlikely, especially given how low Le Pen's victory odds are."
Though trailing in the polls, far-right leader Marine Le Pen's call to take France out of the European Union is rattling financial markets, pushing the premium investors demand to hold French debt over German bonds to its highest since 2012.