Possibly the biggest news out of Europe recently – which has actually not been widely reported, potentially proving the adage that there’s no news like bad news – is that the German general election may turn out to be nothing more than a blip on the radar for currency markets.
Earlier in the year, with Cyprus on the brink and the Italian general election returning an inconclusive result, the Euro was being hammered because of concerns about the stability of the Eurozone. While at that time it was still six months away, questions were being asked as to whether a similar result was possible in Germany, and the potentially greater turmoil this could produce given Germany’s role in keeping the Eurozone afloat.
However recent news out of Germany has suggested Chancellor Angela Merkel enjoys a comfortable lead. Business confidence in the country is also encouraging, implying that most would like to see a continuation of current operating conditions and political leadership. The election is scheduled for September.
June’s G8 Summit in Northern Ireland, meanwhile, renewed tensions on the debate surrounding the UK’s membership of the EU. Discussions of trade between the US and EU were on the agenda, but a protectionist policy push by some nations to support their farmers and France seeking exemptions to protect its film industry were an unwelcome distraction for Prime Minister David Cameron.
The move highlighted the difficulties in maintaining solidarity across national borders to create efficient trading partnerships for the future, and added weight to those arguing for Britain to renegotiate its membership or leave altogether. While not materially impacting on the £/€ value in the short-term, such moves will increase the prospect for volatility as the UK approaches its own general election in just over 18 months.