The latest report from Bloomberg on Monday (July 8) said that the euro fell in response to the initial predictions of the French legislative elections indicating a "shocking victory" for Syriza Coalition. The coalition's advocacy of a significant increase in government spending could be unsettling for investors.
(Screenshot source: Bloomberg)
On July 7, local time, the second round of voting was held in the French National Assembly election. At 20 o'clock local time, at 2 a.m. Beijing time on July 8, the second round of voting ended. The New Popular Front, a coalition of left-wing parties, won a majority of seats.
After the Asian session opened on Monday, the EUR/USD pair opened sharply lower at 1.0801 before falling to 1.0800. EUR/USD traded at 1.0839 on Friday.
(EUR/USD 15-minute chart source: FX168)
The U.S. dollar index opened at 105.12 with a gap higher after trading at 104.88 on Friday.
(U.S. Dollar Index 15-minute chart source: FX168)
Spot gold opened at $2,386.61 an ounce on Monday, and fell to $2,384.69 an ounce at one point; Gold closed at $2,391.28 an ounce on Friday.
(Spot gold 5-minute chart source: FX168)
Syriza achieves 'shocking victory'
After a surprise victory for the left thwarted Marine Le Pen's efforts to bring the far right to power, France is moving towards a suspended parliament and talks to form a government are bogged down, according to the Financial Times.
(Screenshot source: Financial Times)
The Financial Times noted that on Sunday, almost all the votes had been counted, and the left-wing New Popular Front "won the most seats in the high-stakes snap elections, which was a heavy blow to the National Alliance led by Le Pen, which was expected to gain a parliamentary majority." This result will leave the next government of the eurozone's second-largest economy in the balance, as no bloc in the 577-seat National Assembly comes close to an absolute majority.
According to the latest exit polls, the far-right National Alliance and its allies won about 115 to 150 seats, and the left-wing coalition New Popular Front won about 175 to 205 seats, but did not have an absolute majority. And the ruling Ba'ath Party and its centrist coalition won about 150 to 175 seats "together".
In the first round of voting, the far-right National Alliance received 33% of the vote; The coalition of left-wing parties, the New Popular Front, received 28.5% of the vote; The ruling Ba'ath Party and its centrist coalition "together" received 22% of the vote. It is reported that the turnout rate in the first round of voting held on June 30 was 69.7%, a record high since the 1986 parliamentary elections.
According to the analysis of the French media, although the support of the far-right party National Alliance was ahead in the first round of voting, the centrist and left-wing coalitions led by Macron both called for the formation of a broad "Republic Front" before the second round of voting to jointly block the far-right forces from occupying the majority of seats in parliament, which played a key role in the results of the second round of voting. Ahead of the second round of voting, more than 210 candidates from centrist and left-wing parties announced their withdrawal from the election, in order to gather votes and strengthen the chances of defeating the National Alliance.
The National Assembly elections will elect 577 members of the National Assembly for a five-year term. In the first round of voting, the candidates who received more than half of the votes were directly elected, and those who did not receive half but more than 12.5 per cent of the registered voters of their constituencies entered the second round of voting, with the largest number of votes being elected to the National Assembly.
Normally, elections to the French National Assembly are held every five years, but on the night of the European Parliament elections on June 9, President Emmanuel Macron dissolved the National Assembly by invoking Article 12 of the Constitution, thus holding early parliamentary elections.
Le Pen's far-right party, the National Alliance, was widely expected to win the most seats, but the party was expected to come in third behind President Emmanuel Macron's centrist coalition.
Le Pen said after the exit polls that the momentum of the National Alliance was on the rise, and she saw in today's results the seeds of future victories, which were only postponed.
While fund managers have been worried about the Le Pen-led government for the past week or so, the success of the left may still worry markets as it means new uncertainty for the eurozone's second-largest economy and a group of people committed to a broad easing of fiscal policy.
This would exacerbate concerns about France's already bloated balance sheet and put France on a collision with the European Union, which is already making moves to curb the budget deficit.
Bad news for the euro
Market strategist Audrey Childe-Freeman's initial view is that the political uncertainty premium in France has not yet been resolved, which is bad news for the euro.
(Screenshot source: Bloomberg)
Childe-Freeman noted that "the next key issue for the market will be the appointment of the next prime minister, which could have a double effect, with the highly expansionist program of the far-left party 'Indomitable France' being a very bearish outcome for French assets and the euro, and the center-left Socialists likely to do less damage." ”
Laurent Douillet, a European equity strategist, said that even if the end result could be a suspended parliament, French stocks could fall because the new Popular Front, determined to implement expansionary fiscal and anti-market programs, could have more influence in the new government. Franco-German bond yields could jump back to 80 basis points, weighing on financial markets.
Geoffrey Yu, senior strategist at Bank of New York Mellon, said: "French politics is once again confusing. As a result, the risk of expansionary fiscal policy remains, and it is likely to rise marginally. ”
Although Syriza is unlikely to win an absolute majority – which could limit what it can do – this result could churn French assets in the coming days.
French markets were in turmoil in June, with billions of euros evaporated from stocks and bonds as Macron's impromptu polls raised fears that the far right would come to power. But over the past week, traders have made up most of their losses as polls showed that the National Alliance would not be able to gain an absolute majority. France's CAC 40 index erased about half of the losses it had lost last week after Macron announced the snap election.
Preliminary forecasts on Sunday night showed that Macron's centrist party was favored by investors and was still on track for second place despite a poor performance in the first round of voting. The outcome could allow the president to cobble together a centrist coalition.
Still, the inevitable political wrangling, along with concerns about the influence of left-wing forces in the suspended parliament, could push up the yield on the country's 10-year government bonds, widening the spread between them and the safer German bunds again. That spread closed at 66 basis points on Friday after surging to more than 80 basis points last month, the highest level during the eurozone sovereign debt crisis. #记录夏日生活点滴#
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