The success of euroskeptic parties in the weekend’s European Parliament elections has barely registered as a blip on the shared currency’s radar.
The CHART OF THE DAY shows that in the two days following the May 25 announcement of the voting results, the euro traded in a range that’s narrower than its six-month average, a sign that politics is less significant to the market than European Central Bank monetary policy. ECB officials meet next on June 5.
“It’s what the ECB is going to do next week, rather than the election results, that is the key driver of the euro,” Valentin Marinov, head of European Group of 10 currency strategy at Citigroup Inc. in London, said yesterday. “People are watching what the ECB will do to justify further selloffs in the euro. The outcome of the elections means further reforms may face some challenges ahead, but European integration is here to stay.”
Protest parties calling for a scaling back of the European Union made gains across the 28-nation region, with France most affected in the euro area and the U.K. Independence Party winning the most British seats. The limited powers of the Parliament means their successes are unlikely to be translated into EU policy.
The euro was at $1.3635 as of 5 p.m. New York time yesterday, little changed from $1.3629 at the close on May 23, as voting continued through the weekend. The currency traded in a range of 0.4 U.S. cents on May 26, and 0.56 cents yesterday, both below the six-month mean of 0.71 cents.
ECB President Mario Draghi said at last month’s meeting the central bank is “comfortable” with easing policy at the next gathering. The euro has dropped 1.6 percent in the past month on speculation policy makers will introduce new stimulus measures to avert the risk of deflation.