The Euro has been under pressure after a weekend that saw rioting in Paris and a far-right party gain power in Adalusia, Spain. Political concerns across the Eurozone are being closely monitored, following the gap in political dominance, following the steps taken back by Angela Merkel. With concerns growing about the future direction of politics within the Eurozone, there are questions over to what extent this will affect the Euro.
The Vox party gained support with 12 seats being won out of a total of 109. This is indicative of the general trend in Europe to reject the established order of centrist and socialist powers, with governments becoming more and more right wing and extreme. Such a direction is concerning for financial markets since it could be a trigger for a fracturing of the existing order and lead to less economic cooperation between the Eurozone countries.
In France, Macron is struggling to get a grip on the protests that have now turned to riots over an unpopular fuel tax. The growth of support in far-right and far-left governments could easily destabilise the Euro and markets will now closely follow just how this story pans out. Macron had gained power on a promise to be able to tackle such groups but he is now facing calls to resign, over his mishandling of the issue.
The Euro has a tough month ahead with the latest news from the ECB, European Central Bank next week. The ECB has been promising to withdraw their QE plans but many suspect they might need to look at more accommodative measures to keep their economic recovery on track. Clients with a position buying or selling Euros should be very aware of a potentially very volatile period ahead as the market tries to second guess the ECB.
December and 2019 could well see some new pockets of uncertainty owing to political concerns which would put further pressure on the ECB, who have a history of being overly optimistic with their designs on monetary policy.
Thank you for reading and if you wish to discuss further the movements on the Euro and how it might influence your transactions, please do contact me Jonathan Watson to discuss further.