Euro plunged to $1.0740 after France’s Macron called snap election

The common currency plunged to $1.0740 on Tuesday morning following the worrying results of the European Parliament elections on Sunday, where the center-right parties, far-right, and populists made major gains, together with the surprisingly French snap elections.

The renewed uncertainty over the new political landscape in the European Parliament and the political scenario in France undermined the Euro, dragging EUR/USD 0.50% lower to trade as low as 1.0740 during the first two trading days of the week.

EUR/USD, 2-hour chart

The surging popularity of the far-right parties has also added extra pressure on European stocks, which opened much lower on Sunday night, as traders reacted to initial results from the EU Parliament elections.

After suffering a heavy defeat to Marine Le Pen’s far-right National Rally, French President Emmanuel Macron said he would dissolve parliament and called for a surprise parliamentary election for June 30, with a second-round vote on July 7. (Source: www.cnbc.com) 

The pan-European Stoxx 600 index closed 0.27% lower on Monday, while the French stocks were sharply lower following the election drama, with BNP Paribas and Societe Generale leading Stoxx losses, down by 7.5% and 4.7% respectively (France’s CAC 40 index was down 1.4%).

Investors are concerned about the risk of interventionist economic policies and stronger regulation from France’s far-right National Rally party.

Adding to the above, the German Chancellor Olaf Scholz’s Social Democrats also faced its worst-ever result on Sunday, falling to third place behind the far-right Alternative for Germany-AfD, while Germany’s opposition, the CDU (Christian Democrats), became the strongest party, with 23.7% of support. (Source: www.cnbc.com) 

The AfD became the second strongest party in Germany after clinching 15.9% of the vote, ahead of Scholz’s SPD, which won 13.9%, while the Green party’s support weakened sharply from 20.5% in 2019 to 11.9% in 2024.

Analysts appeared divided about whether a snap election could be on Germany’s horizon, in line with a step taken by Scholz’s French counterpart Emmanuel Macron.

Meanwhile, the liberal Renew Europe party and the Greens/European Free Alliance lost a significant number of seats, suggesting that the Green parties were among the biggest losers in the recent elections.

Here is the breakdown of votes for 2024 compared to the previous parliament, where it can be seen that populist, far-right parties could have a greater influence on European policymaking over the next five years.