While much of the recent news-flow concerning the EU has focused around the UK’s Brexit departure, attention is now starting to shift towards fresh risks within the EU. The results of the 2020 general elections in Ireland this week have once again highlighted a shift away from the traditional parties.
Sinn Fein Takes Second Place
The final election results showed Fianna Fail gaining the most seats with 38. However, in a major shock, Irish Republican party Sinn Fein came in a very close second with 37 seats while Fine Gael (headed by current Irish Taoiseach Leo Varadkar) gained just 35 seats, showing a loss of 15 sets from the 2016 general election.
The win for Sinn Fein marks an important shift in Irish politics away from traditional two-party system which has dominated Irish politics. With none of the three parties gaining an outright majority of 80 in the 160 seat Dail Eireann, the parties will negotiate with a view to establishing a coalition government.
Despite the historic victory for Sinn Fein, the prospect of them being involved in the new administration appear slim given that both of the main parties have vowed not to engage with them over the parties historical links to the IRA as well a the fact that the party is predominantly left-leaning in terms of socio-economies. However, both of the main parties will be forced to take notice of the important shift in Irish political sentiment and a coalition government involving Sinn Fein cannot be ruled out.
Commenting on the outcome, Sinn Fein leader Mary Lou McDonald said her party would pursue meetings “with all parties, beginning tomorrow [Wednesday] with those parties who received a mandate for change”. McDonald went on to note that “Fianna Fáil have shifted their position about talking to Sinn Féin and understand that this election has changed everything”.
The Euro has been under offer in reaction to news of the election results given Sinn Fein’s focus on achieving Irish Unity. The party has long called for a referendum on uniting with the North and should Sinn Fein gain power, this theme could gather momentum, then raising doubts about Ireland’s future within the EU.
EURGBP (Neutral, Bearish below ,8464, Bullish above)
From a technical viewpoint. EURGBP is trading below the monthly pivot at .8464. With longer-term VWAP still negative, a continuation lower is likely. However, support into the monthly S1 .8320, with prior 2019 lows just below, could offer a reversal point for a move back towards VWAP and the yearly pivot at .8688.
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