Euro Drops Ahead of Elections on Weekend

The euro was falling today as elections in European countries this weekend and the next week add to uncertainty regarding the ability of the eurozone to withstand its financial crisis.

Greece is the country that was most damaged by the crisis and its parliamentary elections on May 6 are very important for the well-being of the euro. As Holger Schmieding, a chief economist at Berenberg Bank, outlined:

The biggest risk for markets is that in Greece we just don’t get a government and it becomes completely unclear whether or not Greece will be able to comply with the austerity program. If we’re unlucky on Monday morning, markets may wonder whether Greece will be out of the euro within a few months.



There are also presidential elections in France and mayoral in Italy. Votes in German states of Schleswig-Holstein and North Rhine-Westphalia should show how popular (or unpopular) is Angela Merkel and her party.

The euro jumped against the US dollar after the unfavorable US non-farm payrolls, but quickly resumed its decline. The elections may actually be positive for the euro if the eurozone will change its “austerity” path to the one of ”stimulating growth”.

EUR/USD climbed from 1.3152 to 1.3178, but then sank to 1.3083 as of 20:52 GMT today. EUR/JPY slid from 105.45 to 104.42, touching 104.39 intraday — the lowest rate since February 17. EUR/GBP sank from 0.8127 to its daily low of 0.8094 (was the lowest since June 30, 2010).

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.