FOREX
After a shaky start when markets opened for late European Sunday trading, the euro recovered and gained ground over the dollar and other major currencies. The initial negative impact of the unexpected win by the left coalition in the French election, which triggered fears of further fiscal indiscipline in a nation already burdened by a budget deficit of 5%, was followed by some relief. The worst scenario for the single currency, a clear win by the Eurosceptic right, was avoided. Additionally, despite the coalition of the left's victory, there isn't a clear majority in the French parliament, and the possibility of an appointed technocratic government is becoming more likely. Judging by the gains in the stock markets and the strengthening of the euro in early Monday trading, it appears traders aren't dissatisfied with the election results. If that is indeed the case, there may be scope for more euro gains relative to its peers as some political risk is priced out.
Ricardo Evangelista – Senior Analyst, ActivTradesRicardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Stocks climbed higher in Europe on Monday as traders cheered on the latest political developments, which lifted some of the uncertainty from the markets. The results of yesterday’s second round of votes in France have shown that the left alliance has secured the most seats in the Parliament, taking the prospect of a Le Pen-dominated government away from investors’ minds.
Although the initial impact was negative towards French stocks, mostly due to budget and government spending uncertainties a left-wing parliament could bring, market sentiment quickly reversed in early trading as investors were reassured that the potential “Frexit” scenario had been kept at bay.
However, even if the left is seen as the election winner, they haven’t secured the absolute majority. This leads to a hung Parliament, where the left will be limited in what they can do for the country, which may be the best-case scenario for investors. The CAC-40 still consolidates above 7,500 pts, flirting with the upper bound of its flag pattern at the moment.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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