Sinn Fein Beats Main Irish Parties
There are fresh concerns over the prospect of the UK and the EU agreeing to a trade deal in light of recent political developments in Ireland The Irish elections delivered a surprise outcome this week. Sinn Fein, which emerged as the political wing of the IRA, received the most votes nationwide.
Traditionally, the Irish political environment has been viewed as a two-party system lead by Fianna Fail and Fine Gael. However, the results of the 2020 general elections showed Sinn Fein beating both these parties with 24.5% of the vote. Fianna Fail trailed in second place with 22.2% of the vote. Fine Gael came in third with a surprisingly low of 20.9%.
The political upset echoes the surprise outcomes of the Brexit referendum in 2016 and Trump’s election the following year. It also raises serious concerns over the health of Brexit negotiations and the future of Ireland within the EU.
Coalition Talks in Focus
Given that none of the three main parties received a majority of the votes, the election is widely tipped to result in a hung parliament. This means that the focus will then be on the potential coalition options. Both Fianna Fail and Fine Gael have previously said they would not enter government with Sinn Fein. However, in the wake of the results, this could well change.
Sinn Fein has long called for Irish unity and part of the party’s 2020 political manifesto pledged to “start the planning for the unity referendum”. In the wake of the UK exiting the EU, there is now a very real concern that Ireland will be the next to leave the bloc. This would then raise serious questions around the future of the EU as a whole.
Sinn Fein was also staunchly opposed to the Brexit deal and has taken a very pro-EU stance in comments regarding the trade deal negotiations between the UK and the EU. While current Irish Taoiseach Leo Varadkar reaffirmed his stance that he will not be dealing with Sinn Fein, Fianna Fail leader Micheal Martin declined to reiterate his prior comments. This caused some speculation that the country might see a deal between Fianna Fail and Sinn Fein.
If Sinn Fein fails to be included in a coalition government, however, the win for them at this level will boost the profile of the party in a very serious way. This could see them on a path to achieving an outright majority in the future. For now, focus will be on coalition talks. If It looks as though Sinn Fein will enter a coalition government with one of the other parties, this could weigh on EUR heavily.
The sell-off in EURUSD has seen price continue to decline below the 1.0986 level within the broad bullish channel. This channel has framed the reversal from YTD highs. The 1.0879 level is the next key downside support to watch. Here also holds the channel low. If broken, this will put focus on a test of the 1.0829 next.