European Parliament elections: Will eurosceptics triumph?

Elections to the European Parliament, which will last four days, kicked off on Thursday with votes taking place in the UK and the Netherlands. The results for all 28 EU Member States will be announced late on Sunday, on which day the majority of the countries go to the polls. It is expected that in the light of EU citizens' steadily growing dissatisfaction with Brussels' handling of the debt crisis, right-wing populist parties might be given a stronger backing this time.

Harsh austerity measures imposed in many of the countries to counter the effects of the debt crisis have led to a drop in support for the European Union. The deterioration of living standards, the stubbornly high unemployment and uncertainty about the future, combined with a growing aversion to immigration, has weakened the ideals of unity, solidarity and harmony and resulted in a greater focus on national self-interest.

Therefore, it is expected that this time right-wing populists could scoop as much as one-third of the seats of the total 751. Parties which call for pulling their countries out of the EU, such as UK's Independence Party, Greece's Syriza, Italy's Five Star Movement or France's National Front, could gain greater backing. Experts argue however that their power would still remain limited, due to their ultimately not so similar agendas, which would prevent them from uniting their forces easily.

Despite the fact that eurosceptic parties will most probably strengthen their position in the European Parliament, mainstream political groups: the centre-right European People's Party, the centre-left Socialists and Democrats, the liberal ALDE alliance and the Greens should win the elections with a 70% support. It is important to remember that this vote doesn't really reflect the moods in individual Member States (not to mention that the turnout is usually very low, around 40%) and not all of them are so fiercely anti-European. In fact, according to early exit polls, Dutch citizens turned away from the far-right Party for Freedom, choosing to support pro-EU groups instead.

Alberto Muñoz, senior adviser at FXStreet, predicts that “once the election results are known on Sunday night, we should expect a notable fragmentation of the European Parliament as many small parties will come in, including many right-wing and eurosceptic ones, as a result of citizens' disenchantment with the mismanagement of the financial crisis in the European Union.”

The Forex expert believes that if the eurosceptics gained around 20% of the seats, as recent polls suggest, it could “lead to a situation of short term uncertainty for the markets possibly causing a bearish opening gap of 20-30 pips on EURUSD which could even temporarily fall below the key support at 1.3630. Anyway the medium-term impact of these elections should be limited as European Parliament is expected to remain in the hands of the European People's Party and the Socialists.”

“However, if the success of these parties were larger than expected, it would be an unexpected scenario for the market which could trigger sell orders, especially if the EURUSD falls below the range 1.3600 - 1.3630, which could push prices lower to the  1.3500-1.3470 support area,” Alberto Muñoz adds.

Finally, the announcement of the results of the elections to the European Parliament, expected at 21:00 GMT on Sunday, might be overshadowed by the developments in the presidential elections in Ukraine, scheduled for the same day.