How Will the Euro React to the European Election Shocker?

How Will the Euro React to the European Election Shocker?

The world seems to be going through a political awakening, shuffling around allies and creating global economic turmoil. We’ve seen Brexit shatter GBP stability, and Trump’s trade war fueling volatility for USD. Now we have the European Parliament elections taking the spotlight. Read what has happened so far and what to expect for the EUR in the wake of the recent results.

Trade with Exness as the euro reacts to election influences

The results of the European election

The European election made a sharp right when nobody expected it.

For the first time in EU history, the traditional parties of practically every nation failed to hold a majority, losing seats to the center-right European People's Party (EPP). Europe's alternative right’ish leaders are gaining popularity, and their common goal seems to be a total restructuring of EU rules. One man hoping to lead the way is Italy's Deputy Prime Minister, Matteo Salvini. His hardline party went from quiet voice to major opinion maker in less than a year, and now he and similar party leaders intend to expand their revolutionary goals across the entire European continent.

France’s far-right intends to pursue changes in immigration issues and strip back the EU’s influence on French laws. The populist Alternative for Germany Party has been promoting an EU exit for some time, but now shows motivation to pursue its right-wing agendas from within the block. Viktor Orban stands tall in Eastern Europe with a right-wing stance that continues to gain support from Hungary’s neighbors.

Simply put, populism is on the rise in Europe, which means we’ll see a lot of changes in the coming months and years. Conflict might grow between EU members, as not every nation will agree with the populist majority and their changes to EU law. And with new coalitions emerging within the block, a stormy forecast for the future of the European Union seems likely.

EU and EUR forecasting

A destabilised economy creates an unstable currency.

As seen with Brexit and GBP, political discord can have a dramatic effect on a currency’s strength within the foreign exchange market. EUR had a long rise in Q2, until May 1 when an “overbought” spike caused a slow correction and prompted a bearish trend. The fall slowed to a brief sideways move, but then returned to the downtrend immediately after the election result release. An uncertain future for the EU will likely fuel a continuing downward trend for EUR.

In the absence of positive news—strong enough to reverse the trend—traders can take advantage of a Sell order to generate profits as the fall continues. FX News suggests you keep a close eye on EU affairs and watch out for announcements that could change EUR sentiment. The Sell order might be a good trade right now, but we’ve seen two massive “overbought” signals this month already, which could trigger stop outs and rapid losses for traders shorting the euro.

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