Euro Drops as French Election Raises Concerns

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Tradervox (Dublin) -The euro has registered the first decline in five days as concerns about the French election outcome rose. Traders are wary of the effect the elections will have of the regions ability to fight debt crisis. According to Junichi Ishikawa of IG Markets Securities LTD in Tokyo, the French election hold a lot of risk as an opposition win would hamper efforts on debt crisis. Many analysts are of the view that the Sarkozy and Angela Merkel cooperation in the debt crisis efforts have been instrumental and this might change if the opposition wins.

Pressure is mounting on Sarkozy as his party lost marginally in the yesterday’s vote affecting the euro in the forex market. The second and final round of election will be held on May 5 when the country will know its next leader. If Sarkozy is defeated, France would join the likes of Portugal, Ireland, Italy, Greece, Slovakia, Spain, and Slovenia governments that have been ousted since the commencement of the 17-nation currency.

The euro has weakened by 1.1 percent against the yen to trade at 106.57 while it dropped by 0.6 percent against the US dollar to trade at $1.3140. The yen was up against the greenback by 0.5 percent to exchange at 81.90 yen per dollar. The Australian dollar also registered some loses after the PPI dropped; however, positive report in Chinese PMI has boosted the currency.

Another political factor that may affect the euro is the Netherlands’ cabinet meeting to discuss strategy to pass a budget that meets EU targets. Prime Minister Mark Rutte may face an early election after Freedom Party withdrew support for the minority government on Saturday April 21.

The political scenarios in the region and resurgence of the debt crisis are set to push the euro down against most currencies. However, such effects may be canceled by positive economic reports from the region especially reports from Germany.

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