L'outcome of the elections has always been a driving element of foreign exchange market, but like now it had never happened. The electionthose carried out or scheduled for this year are very numerous and not of little importance, consider the American attendance or the renewal of the European Parliament. And if they then combine, as is happening, with a change of pace in the policies of central banks, the impact is even more evident and uncertain.
The elections in the EU accentuate an ongoing trend
The outcome of the European elections, in reality, has accentuated a trend already underway on the foreign exchange market, which tends to favor the dollar to the detriment of the Euro, which fell to 1.075 (-0.64%).
Confirmation of Ursula majorityin fact, was counterbalanced by terrible results obtained in France by President Macron, who was forced to dissolve the chambers and call elections for June 30, after being “scrapped” by Marine Le Pen's far-right Rassemblement National party. Same goes for Austria, Germany and Hollandwhere the parties of extreme right they raised their heads again, putting pre-existing leaderships in crisis. Italy is no exception, where the right had already come into government with Giorgia Meloni, albeit mitigated by the moderate wing of Forza Italia.
These uncertainties about the future they are not helping the euro, in a phase of great fragility and uncertainty of the single currency, which is affected by both the economic and geopolitical framework and the central bank's policy.
The influence of central banks
The ECB interest rate cutannounced last week, has certainly influenced the weakness of the euro against the greenback, which is suffering from a Fed certainly more cautious and minimal intention of raising interest rates.
Last week, the ECB certainly did not surprise with a rate cut universally expectedbut what moved the markets is the not having given timescales about further future rate cuts, except the confirmation that they will be conditioned by the data released in the coming months.
The dollarat the same time, recorded a strong surge last Fridaywith the dollar index closing the week up by around 1%, after the strong data on US employment. The numbers published by the US Department of Labor, in fact, confirmed the health of the labor market, causing Treasury yields to soar and averting a possible rate cut of the Fed. Something more will be known this week, as both inflation data and the Federal Reserve meeting are on the calendar, from which no actions are expected but only indications of future cuts.
And the pound?
There GBPhowever, continues to move onwaiting for a landslide Labor victory in the elections that will be held next month and this is supporting the British currency, especially compared to the euro, towards which less conflict is expected in the future. Before then, however, they will be i outgoing dataespecially inflation and wages, and the expectations for the Bank of England's policy to hold court.
Elections almost everywhere
The electoral outcome in some emerging economies has greatly affected local currencies, for example the South African rand, the Mexican peso and the Indian rupeealso because some results emerging from the polls were perceived as not favorable to the market.
“In India the expectations of a landslide victory for Prime Minister Modi – explains Richard Flax, Chief Investment Officer of Moneyfarm – initially triggered a rally in local markets, which then took a step back as soon as it became clear that the majority was smaller than expected ; in Mexico the historic victory of the center-left coalition led by Claudia Sheinbaum was greeted with concern by the markets, due to fears linked to social policies and the increase in public debt; finally, in South Africa the ruling party, the ANC, lost votes to the newly formed MK party led by former president Zuma. The hypothesis of a coalition executive is therefore envisaged, with the support of the pro-business Democratic Alliance (DA) party, a scenario that reassures investors even if the balance is fragile and today within the ANC there is they are currents that do not look favorably on the alliance with the DA and would prefer to form a coalition with other parties”.
Exams won't end this summer. The highlight event of the year will be the epresidential lectures in USA il next November. According to polls, Donald Trump has a good chance of winning and this time the markets could take the news very badly, especially after the latest worrying declarations on the independence of the Fed.
