In the European Parliament elections, the far right came out on top. The impact of this victory, which made a great noise around the world, on the Euro is being wondered. While the euro weakened after the elections, analysts pointed to political risks and explained possible scenarios.
The victory of the far right in the European Parliament elections made a big noise. French President Emmanuel Macron decided on early elections after his party suffered a defeat in the European Parliament elections.
The victory of the far right in the European Parliament elections brought along question marks about the future of the Euro.
After the election results, the euro fell up to 0.5 percent against the dollar in Asian transactions, while Euro/Dollar was traded at 1.0748 for a while.
The euro had gained about 3 percent from its April lows as the European Central Bank (ECB) started interest rate cuts earlier.
“It can be seen as a blow to the euro positive outlook in recent weeks”
Evaluating the elections, Credit Agricole G-10 currency strategist Valentin Marinov said, “These results can be seen as a blow to the euro positive outlook in recent weeks. The widening of bond yield spreads will also be negative for the euro.”
After the election results, French bonds lost value against their German counterparts in the futures market, causing the yield spread to widen.
Singapore-based RBC Capital Markets Strategist Alvin Tan predicted that the euro / dollar could fall to 1.05 in the third quarter and said, “Political risks for the euro are increasing again.”
Interest rate path comment from Morgan Stanley
According to Morgan Stanley, not only political risk but also the ECB’s lack of clarity on its interest rate path is a risk for the euro. Strategists, including Matthew Hornbach, argued that the euro is more dependent on US data and Fed decisions due to the ECB’s unclear path.
The rise of the far right in Europe
In the European Parliament elections, the far-right parties outpaced the center parties in the leading countries of the Eurozone, leading to radical decisions.
French President Emmanuel Macron announced early elections for the parliament after the election results. Macron’s liberal Renaissance party received 15 percent of the votes in the EU Parliament elections, while the National Movement led by Marine Le Pen received 32 percent support. Although the early elections will not affect Macron’s presidency, they will be important for the political future of his party.
The first round of parliamentary elections in France will be held on June 30. Yves Bertoncini, an independent EU policy advisor, said of Macron’s early election move: “It’s not only a gamble but also a daring move. Usually those who make this move don’t have many cards left.”
In Germany too, the ruling Social Democrats did their worst result in history in the EU parliamentary elections, falling behind even the far-right AFD. In Italy, as expected, Prime Minister Giorgia Meloni’s Brothers of Italy party won the EU Parliament elections.
