Europe's emergence as a bastion of relative political stability after last April's French election -- which launched the EUR/USD pair almost 20 figures higher -- appears to have been overestimated, leaving the currency exposed as the viability of the eurozone is suddenly a matter of renewed debate.
Reviewing the financial and political commentary of the time is instructive.
Macron's victory was the seawall against a rising tide of populism from Trump and Brexit.
A lot of money subsequently flowed into European markets, creating a self-reinforcing feedback loop that foresaw optimism in a unified political core that would promote growth and allow the ECB to normalize monetary policy.
Maybe not, considering Italian League leader Matteo Salvini's statement yesterday that “the upcoming elections will not be political, but instead a real and true referendum ...
between who wants Italy to be a free country and who wants it to be servile and enslaved.” The existential threat to the euro from diverging political and economic forces is back on the table and the market is neither priced nor positioned for that possibility.
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