Last weekend brought unprecedented events in two European powerhouses. Elections in France and Great Britain not only changed national and European politics but also caused significant movements in various markets.
French aftermath of the European elections
In the elections to the European Parliament in June, far right-wing parties from all over the Union announced their spectacular victory. Even though it didn’t result in taking power from current politicians from the center, the substantial growth of radical rights cannot be unnoticed. It concerns countries from central Europe, such as Poland, Germany, and, obviously, France.
In case you missed it: Marine Le Pen’s far-right National Rally won in the June EU elections by a staggering 17 percentage points against Macron’s centrist alliance. As a result, the French president announced snap elections for the beginning of July. The first round of elections indicated that Le Pen would win – the only matter was whether the far-right would get 289 seats in the National Assembly, which is the number to control French politics without looking for a potential coalition. The forex market reacted, as the Euro strengthened against the Dollar right after the first round. It suggests that traders didn’t believe in gaining the power by Le Pen.
Moreover, traders could also notice that the French economy didn’t respond well to the European elections. CAC40 fell significantly, with some companies from the banking sector, such as BNP Paribas, losing over seven percentage points right after the elections.
Unexpected results
The French elections brought mind-blowing results, as the coalition of the French left took the most seats in the National Assembly (over 180). Emmanuel Macron’s centrist party finished in second place and will likely receive over 160 seats in the Assembly. Le Pen’s National Rally with its allies will get just 140 seats.
Even though the far right took over 50 more seats in the National Assembly comparing to previous elections, these results have to be considered a shocking defeat after the sensational run over the last couple of weeks.
France decided to trust left and center parties with multiple extreme challenges, including the Russian invasion of Ukraine, the migration crisis, and the upcoming Olympics in Paris. All eyes are turned to one of Europe’s leaders, and they have to deal with it.
What happens next?
Due to the unprecedented results, it’s impossible to predict the future of French politics. No polls or predictions showed such a spectacular Le Pen loss after the first round and recent European elections.
Politicians sitting in the National Assembly have to form a coalition to avoid another havoc in France. It’s doubtful that leftists or Macron’s center will stand together with the far-right National Rally. The last potential option is the alliance “for the greater good” between left and center, even though there is no love between both sides.
Traders will have to stay alert to French politics in the coming days, as these decisions may heavily impact the whole market.
Elections in Great Britain: no surprises
After 14 years of Tories’ rule, the Labour Party finally took power. New Prime Minister Keir Starmer led to one of the biggest victories in the last hundred years. The last years have been turbulent for the British economy, with Brexit and the pandemic causing chaos in international and internal politics.
How UK elections can impact markets?
Opposite to the French mayhem, the UK elections underwent without any spectacular turnarounds. The Labour Party took most of the seats in Parliament, and analysts pointed out several market sectors that might potentially benefit from the change of power in Great Britain.
Quick reminder: FTSE100 consists of 100 essential British companies. As a result, the profit of each company can lead to the rise of the index. The new government has focused on several economic sectors during the campaign. The market should pay attention to the housing sector, as the new Prime Minister indicates that the country will support it. The FTSE100 may also rise thanks to these companies.
Multiple positive indicators
The UK elections are one of the indicators that show the movement of the most essential British financial assets. But are they the most important? Should they immediately alarm traders to focus on London markets?
There are definitely other factors that should be considered. The FTSE100 has been increasing for the last couple of months. Upcoming political stability is important, but potential interest rate cuts and easing back the inflation also played a vital role in more positive outcomes in the UK’s economics.
European elections: conclusion
It has been a wild month in French politics, with the spectacular victory of the far-right National Rally in the European elections, followed by a sudden defeat in national elections. Macron and left-wing politicians won against their biggest enemy. Traders should keep tabs on the current political situation in France, as it may impact vital assets in the European markets, including the strength of the Euro.
There were no surprises in Great Britain, as the Labour Party won with a staggering advantage. Now, Keir Starmer must deal with the outcomes of Brexit and the COVID pandemic still haunting the British economy. Usually, the market favors political stability, so traders should pay attention to the first few weeks of the Labour Party’s decisions.
