Dutch Election News: Euro Set to Fall Amid Election Result Chaos

Although last week’s European Central Bank (EBC) meeting gave the euro a boost, uncertainty about the next Prime Minister of the Netherlands has unsettled the currency.

The EUR/GBP exchange rate is sliding from an 8-week high to trend around 0.873, with GBP/EUR returning to 1.14. However, with the US dollar coming under pressure of its own, the EUR/USD exchange rate is still around a three-and-a-half week high of 1.067.

Recently the euro was able to hit multi-week highs against the pound and US dollar as investors judged that the odds of an election victory for Dutch populists had fallen.

With only two days to go until Dutch voters head to the polls, however, markets are getting jittery.

Much of the election coverage has revolved around Geert Wilders, leader of the Party of Freedom, who has seen his popularity rise in recent months thanks to a growing wave of nationalism and anti-Islam sentiment across the Netherlands.

The popularity of Right-winger Geert Wilders could plunge the future of the EU into chaos

A victory for his PVV party would likely see him withdraw the Netherlands from the European Union.

There is also speculation that a PVV triumph would embolden French voters to back far-right Presidential candidate Marine Le Penn in elections beginning next month.

As Le Penn wants to withdraw France from the Eurozone, such an outcome would present a very real threat to the euro.

Wilders’ popularity has taken a hit over the past week, however, after all of the Netherland’s established political parties refused to co-operate with the PVV.

This is a huge blow for Wilders, as the Netherlands’ political system runs on proportional representation and a coalition government - likely made up of between four and six separate parties - is all-but inevitable.

Unless several parties go back on their claim to alienate Wilders, the PVV would have to win 76 seats on its own to get into power.

The latest polls expect the PVV to secure 22 seats, leaving it the second-largest party in terms of seats behind the current leaders of the coalition government, the People’s Party for Freedom and Democracy.