The euro might have looked fairly optimistic early yesterday but is getting a reality check today. The first round of the French elections showed a clear win for Le Pen’s far-right faction. Although the margin of victory was a little less than expected, it also reaffirmed a failure on Macron’s government in appeasing the people.
The worry now is that we might just see a hung parliament in France. There’s a lot at stake as we head into the second round of 7 July. And the risks there are perhaps reflected in the euro’s lack of faith today.
EUR/USD is down 0.2% to 1.0715, nearly erasing the entirety of the opening gap higher from yesterday. Meanwhile, EUR/GBP and EUR/CHF are both down 0.1% to 0.8480 and 0.9685 respectively on the day.
It’s a tough situation for traders to balance out. On the one hand, major political uncertainty in the region’s second largest economy is not a good sign. And there’s the threat of this being a sign of things to come in other countries in Europe too. On the other hand, Le Pen has also promised to increase spending. And that entails fiscal risks to France at a time when they are already under scrutiny from the EU.
This article was written by Justin Low at www.forexlive.com.
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