How Will This "Time Bomb" Affect The Foreign Exchange Market?

Many investors do not welcome uncertainty, while Spain's election may bring new uncertainties to the market.

Before the Spanish election in December 20th, the latest polls showed that the People s Party was expected to win the most parliamentary seats, but it might have failed because of the loss of most votes.

Bloomberg articles say most analysts expect the PPP to join hands with the Ciudadanos to form a coalition of political parties, but it may take several weeks to reach a final alliance agreement.

In the latest poll, voters tend to be a radical new leftist party, the Podemos, which adds more uncertainty to the final election and how to form a government smoothly.

Because of this, Deutsche Bank issued a warning that if the trend continues, even if the people's party and the public party succeed in forming a coalition of political parties, they may lose most votes.

Analysts said that no matter which party eventually formed the next government, Spain

It will delay economic recovery because of prolonged political uncertainty, which will eventually lead to slower reform.

At present, Spain and Italy.

Smaller, indicating that market anxiety is not very high.

German Commerzbank analysts predict that before and after the election, compared with the core European debt, Spanish and Italy bonds will be in a relative predicament.

The interest rate difference between the Spanish government bonds and the German government bonds in the two years is now 47 basis points, close to the largest level in five months.

Spain's 10 year Treasury yields declined 1.5 basis points to 1.72%, lagging behind the decline in 2.5-4.5 yields of other euro zone treasury bonds.

"Political uncertainty often makes traders more anxious, which is why we think traders will stabilize the Spanish market, or simply wait and see on the sidelines until the final result is released."

Naeem Aslam, chief market analyst at AvaTrade, told Reuters.

Even if the party alliance formed by the people's party and the Democratic Party can get enough parliamentary seats to form a new government, they may need to focus on who will do it.

And it takes some time.

The leader of the party has declared that they will not support Rajoy's succession to the post of prime minister.

There is a very hopeful fact that the people's Party led by the current Prime Minister Rajoy (Mariano Rajoy) has experienced the worst local election results in 24 years, and there have also been many political scandals in Spain, and new political parties have also risen.

As a traditional bipartisan political system in Spain, the Spanish Socialist Party (Socialists) and the people's party have dominated the political structure of the country for a long time.

In the first 5 public opinion polls, the average score of the socialist party was 20.7%, and the people's party got 25%-26% in the latest polls.

The Spanish general election will end at 8 pm local time on December 20th.