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Political instability hits the Euro
Published on 22.02.2017 22:56

The Euro plummeted to a 6-week low in today’s trading session before slightly recovering as predictions of political instability swept through the European Union on the back of upcoming elections due out in the upcoming months.

At 8.28pm (GMT) the Euro was trading at $1.0570 against its US counterpart, after hitting a low of $1.0493, and up from $1.0545 in yesterday’s trading.

French presidential candidate Marine Le Pen has promised to renegotiate France’s association with the EU if elected, which includes pulling out of the European currency, and possibly exiting the EU all together.

The news is currently sending shockwaves through financial markets, as many believe if Pen is elected, and follows through on her promises; it will be the beginning of the end for the European Union.

The current uncertainty is taking heavy toll on the euro, and may see the currency head towards parity with the US dollar.

“Political risk from the French presidential election is becoming a key driver of increasing euro weakness in recent days. With a deterioration in polling numbers for candidates such as Francois Fillon and Emanuel Macron, the prospects of Marine Le Pen improve,” said Richard Perry, market analyst at Hantec Markets.

“Whilst the market is still not anticipating a victory for Le Pen in the second round, the probability is apparently now above 40% and there still needs to be an adjustment to factor in the increased risk,” he added.

With less the 3 months to go before the French election, the volatile is expected to continue, and the Euro may face more pressure as the date draws closer against the major currencies,

"So much uncertainty with 9 weeks to go until the first round of the (French) election means we will probably see nervousness persist, and undermine the Euro across the board," Societe Generale analysts concluded.


Andrew Masters

Analyst

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