Euro and pound little changed after European elections

Summary:

• A big alliance of EPP/S&D is set to lose its majority in a new European Parliament
• Eurosceptics win in France, Italy and the UK; in general populist parties fail to gather many more seats though
• Both EUR and GBP trade slightly changed this morning amid thin liquidity due to a holiday in the US and the UK

Euroscepticism wins in key countries

The preliminary results of the European elections ended on Sunday showed that the current big alliance of EPP/S&D would lose its majority in a new European Parliament, however, such an outcome had been expected. On the other hand, some warning signs might be noticed elsewhere with a clear win of Eurosceptic parties in Italy, France or the United Kingdom.

A new European Parliament will no longer be governed by a big alliance of EPP/S&D. Source: BBC

As votes are still being counted, the Brexit Party in the UK is set to win this year’s elections having almost 32% of voters’ support, the Liberal Democrats are expected to finish at the second place with almost 19% of the votes while the Labour should be third with ca. 14% of the votes. As one may notice, the Conservative Party is expected to suffer a tremendous defeat being placed at the fifth place with only 8.7% of the votes, the worst result since 1832, as BBC reports. These results clearly showed that inhabitants have become frustrated with several failures of the current government in delivering Brexit. On top of that, the results produced also a high degree of polarisation in the country making possible next general elections much more unpredictable.

Italy also saw its populist party - Lega - beating its peers in the elections and getting as many as 33.6% of the votes (as for now, the votes are still being counted). The Democratic Party is expected to finish at the second place with 23.5% of the votes while the Five Star Movement at the third place with almost 17% of the votes. The Lega’s leader Matteo Salvini was stunned by the elections’ results and said that Europe was changing with Le Pen winning in France, Farage in the UK. He also added that he would not seek additional ministerial positions in the government following the elections. Finally, in France the National Rally is also set to win with 23.5% of the votes, with the party’s of President Emmanuel Macron expected to finish at the second place with 22.5% of the votes. In turn, in Germany the CDU/CSU seems to be a clear winner with almost 30% of the votes, the Greens are expected to be at the second place with 21% of the votes, a big surprise there. A similar picture was also seen in other countries like Hungary (Orban’s Fidesz Party got more than 50% of the votes), Spain or Denmark. However, in spite of the fact that Eurosceptic parties managed to win in some countries, their representation in a new parliament is likely to be pretty the same. Thus, the current alliance of EPP/S&D will be forced to seek another party to forge a parliament and that means possibly weeks of talks. Among parties being under consideration of a possible coalition are ALDE and Greens as both improved their results compared to a number of seats in the current European Parliament. Finally, the 2019 elections saw the highest ever turnout of 50.5%.

The EURUSD keeps moving beneath its crucial trend line amid calm trading this morning. A breakout of this line seems to be pivotal to allow buyers to head higher. The critical support might be still found nearby 1.1120. Source: xStation5

In the other news:

• Greece’s Tsipras has called national elections on June 30 after conceding defeat in the European elections

• Chinese industrial companies’ profits fell 3.7% YoY in April after rising 13.9% YoY in March

• British pound trades 0.2% higher against the US dollar after the elections