The euro skidded against the naira in the unofficial market on Monday after French President Emmanuel Macron called a snap election following a defeat in the European Union vote by the far-right.
Recent price action revealed that the euro is now losing major support against the Nigerian currency, leading the EUR/NGN price to lean bearish.
Growing ambiguity surrounding the upcoming French snap elections is affecting the euro.
The naira strengthened below the N1600/Euro level in the black market as traders reevaluated and moderated demand pressure on the European currency. It closed above N1631/Euro on Friday.
The dollar also showed strength against the European currency, partly due to the geopolitical implications of the far-right’s grip on power in Europe.
Additionally, the dollar’s outlook is favourable as summer draws near; the euro is predicted to struggle to break above 1.10 against the dollar and is more likely to drop below the 1.05 support level.
The euro plummeted to a 21-month low of $1.075 in early morning London trading and dropped 50 basis points to a one-month low.
The positive US NFP report, meanwhile, dampened Fed rate cut bets and gave the US dollar another boost to tame the European currency’s upside.
French bond futures declined marginally, and EuroSTOXX 50 equity futures were down 0.4%, continuing a sharp decline that began late last week.
Investor attention will likely focus on Italy’s 10-year government bond yield differential over benchmark German paper when the rest of Europe’s markets open later today.
Far right grip on Europe
French President Macron chose to hold early parliamentary elections in a desperate attempt to turn things around.
With 33% of the vote, Marine Le Pen’s National Rally party appears on track to surpass Macron’s 15% share in the EU election.
He would be left without a voice in domestic issues should the far-right National Rally party secure a majority in parliament.
Concerns about France’s high debt levels have grown this year, and there may be a greater focus on the potential effects of the return of political instability on the country’s economy.
Standard & Poor’s withdrew its rating on France’s sovereign debt last month, days before the EU election, dealing a severe blow to the government’s management of its finances.
Macron isn’t the only entity experiencing a significant setback due to the recent European parliamentary elections, even though France is making headlines.
The far-right AfD party in Germany came in second in the polls, highlighting the increasing momentum leading up to next year’s federal election.
Based on projections, they should receive approximately 16% of the vote, a record high.
In Austria, the far-right Freedom Party has secured the top spot in the national poll for the first time, garnering close to 26% of the vote
Green parties are the largest losers overall. However, left-wing factions had better success in countries like Denmark, Finland, and Sweden.
After Sunday’s vote, centrist, liberal, and socialist parties were expected to hold onto their majority in the European Parliament.
However, nationalists opposed to Europe gained the most ground, casting doubt on the ability of powerful nations to shape EU policy.
Important U.S. elections are in November, and the UK has a general election on July 4.
However, global financial markets have recently become brittle as expectations of a rate cut in the United States have decreased, giving the naira and euro less room to maintain the momentum seen in March.