Brocker.Org: Brexit Briefing: Austria Brings Populism Back Into Focus

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Talking Points

Austria will hold a snap election in October and the Eurosceptic right-wing Freedom Party will likely be a member of a new governing coalition.

That’s a risk for the Euro, which is currently benefiting from Donald Trump’s problems in the US.

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Elections have already passed this year in the Netherlands and France without giving the markets too much to worry about, and are likely to pass too in France (again), the UK and Germany without upsetting the applecart. But what about Austria?

The little Alpine nation that was once at the heart of an empire and is now an EU member is to hold an early snap parliamentary election on October 15 after persistent rows within the governing coalition. As a result, the far-right Freedom Party (FPÖ), which is Eurosceptic, anti-immigration and anti-Islam, could become a member of a new ruling coalition.

While this would not have the market impact a far-right victory in France would have had, it would certainly bring the subject of populism back into focus after the votes for Donald Trump and Brexit, and would again raise the specter of a Euro-Zone breakup.

The FPÖ led the opinion polls for more than a year before the conservative People’s Party (ÖVP) elected 30-year-old Foreign Minister Sebastian Kurz as its new leader on Sunday, putting it ahead of the FPÖ. Kurz has been likened to France’s Emmanuel Macron and has revitalized his party. However, no party is likely to win outright, and the FPÖ could well become part of a new government.

An EU referendum – like the UK’s – would unlikely be held immediately, but strong pre-election polling by the FPÖ would clearly be a risk for the Euro and help curb the recent strength of EUR/USD on Trump’s mounting problems.

Chart: EUR/USD Daily Timeframe (2017 to Date)

Brexit Briefing: Austria Brings Populism Back Into Focus

Chart by IG

— Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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