The recent shock election called by French President Emmanuel Macron has sent ripples through the euro and European markets. The euro has skidded, falling 0.3% to a one-month low of $1.0764, while also slumping to a 21-month low against the pound. EuroSTOXX 50 equity futures have dipped by 0.4% and French bond futures have also edged down. This move follows Macron’s decision to call for a parliamentary election with the first round scheduled for June 30.
With Euro-sceptic nationalists making significant gains in the recent European Parliament elections, questions have arisen about the future direction of the European Union. While centre, liberal, and Sociality parties are set to retain a majority, the rise of Eurosceptic parties raises concerns about major powers driving policy in the EU. Macron’s decision to call for a snap election has introduced a new element of uncertainty in the markets.
Market experts have voiced concerns about the potential impact of Macron’s snap election decision on the Euro and European assets. While the Euro has been relatively stable compared to previous elections, the surprise reaction from France has acted as a wake-up call. The Euro area assets have been cushioned by diminished Euroscepticism, but the recent events have the potential to shake market confidence.
European stock indexes, such as the broad STOXX 600, could be vulnerable to volatility in the wake of Macron’s decision. Additionally, the spread between German and Italian 10-year bond yields may widen, leading to increased market uncertainty. However, experts note that EU election results do not always translate into domestic election outcomes, as different election systems can influence the final results.
The European Central Bank’s recent rate cut, the first in five years, has already impacted the Euro currency. With a decrease of almost 2.5% against the dollar this year, the Euro’s performance has been influenced by differing outlooks for interest rate cuts in the Euro area and the United States. Concerns about France’s high debt levels have also added to the economic uncertainty surrounding the country.
Macron’s shock election announcement has set the stage for a period of increased market volatility and uncertainty in Europe. While the full impact of this decision remains to be seen, investors and analysts will be closely monitoring the Euro, European equities, and bond markets in the coming weeks.