EU Elections Could Turn EUR Positive Unless Merkel Moves

Many Europeans are not happy with the system ten years after the crisis, may vent their anger in the European elections, frustrate further integration, thus sending the euro down. That is the main narrative of the upcoming EU elections. And despite a higher level of employment, anxiety over immigration, Russia, US isolation, and other topics disturbs a significant chunk of 400 million eligible voters in the old continent.

We reflected these views here: Anti-EU populism rise not priced in the EUR, European election could hit Euro

But this is not necessarily the case. 

Why pro-EU parties may gain

A recent poll by Eurobarometer showed that 62% of Europeans see the EU as a good thing, the highest since 1992.

Europeans support the EU at the highest levels since 1992 Eurobarometer

 

Positivity reached its lowest since 2012, deep in the crisis. As the economic situation improved, support for the bloc rose. And the project received another boost after Brexit. Instead of speculating on the next country to leave, more people began seeing the importance of the bloc and feared the consequences of leaving it despite all the troubles.

And while populists are on the rise, they have quietly stopped talking about holding Brexit-style referenda or leaving the euro-zone. Moreover, amid external threats from Russia and the distancing US, some see more need for a robust European body.

Another reason why pro-European parties may outperform expectations stems from fear from the populists. The incessant talk may bring more people to the polling stations and raise the dismally low turnout seen in previous editions.

So, there is also a case for a rise in support for pro-European, mainstream parties and not only an increase in the vote for populist ones.

The reaction in EUR/USD depends on expectations for the full composition of parliament but more for the four largest countries in the euro-zone: Germany, France, Italy, and Spain. The UK, another large country, is not on this list. Britain uses its own currency and is set to leave the EU.

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