Like a giant with feet of clay, the euro is tottering on the global currency scene after an action by Emmanuel Macron.
The single European currency, a symbol of stability and economic power, is today weakened by the political upheavals which are shaking one of its founding members: France.
At the heart of this turmoil is a decision with serious consequences: the dissolution of the National Assembly by President Emmanuel Macron.
A strong act, which plunges the country into a period of uncertainty two weeks before crucial legislative elections. A risky bet, which shakes the financial markets and undermines investor confidence.
Because behind this early election looms the shadow of major political changes. The extreme right, embodied by the National Rally, and the radical left, united under the banner of the New Popular Front, dream of making their sensational entry into government.
Two political forces with diametrically opposed economic programs, but which share the same desire to shake up the status quo.
And it is precisely this prospect that makes the markets shudder. Investors, these beings sensitive to the slightest upheavals, are worried about the potential consequences of these political upheavals. They fear an explosion of budget deficits, a questioning of the trajectory of public finances, a period of instability and political impasse.
Faced with these uncertainties, the euro is plummeting. Like a tightrope walker on a fragile wire, it falters against the dollar, the safe haven par excellence.
The single currency has lost 1% against the greenback since the announcement of the dissolution of the National Assembly. A decline which reflects the growing anxiety of the markets regarding the French situation.
But this fall in the euro is not just a knee-jerk reaction. It reveals deeper fault lines, concerns that go beyond French borders.
Because France, as the second largest economy in the euro zone, has considerable weight. Its political upheavals have repercussions on the entire European structure, weakening investor confidence in the single currency.
So, should we panic? Experts urge caution. Some, like Brad Bechtel of Jefferies, believe that the market is over-reacting, that concern is already largely integrated into prices.
Others, like Derek Halpenny of MUFG, point to the widening yield gap between French and German bonds, a tangible sign of investor concerns.
One thing is certain: the euro has not finished swaying to the rhythm of French political upheavals. Until the elections of June 30 and July 7, volatility will be its daily lot.
A journey strewn with pitfalls, which will test the resilience of the single currency and the solidity of the European project. Because beyond the euro, it is the very future of Europe that is at stake in the French ballot boxes.
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