Europe: How Markets View European Unity Vs. Disintegration - by Erik Norland

EU-US: It is high time for a divorce

Opposing forces championing integration versus disintegration are assailing Europe. In the past two years, both sides have scored important victories. Britain's Brexit, Spain's Catalonian independence referendum and the entry of the nationalist Alternative fur Deutschland (AfD) party to the German parliament, or Bundestag, were victories for proponents of lesser European unity. The electoral defeat of far-right forces in the Netherlands and the victory of Emmanuel Macron in France were celebrated by those favoring the guiding principle of an "ever closer union."

Whatever one thinks of Brexit, the prospects for deeper European integration and the legitimacy of the various national independence movements, the currency markets' view is unambiguous: they strongly favor deeper political integration:

• When exit polls mistakenly called the Brexit referendum for the "Remain" voters, the British pound (GBP) rallied from 1.45 to 1.50 versus the U.S. dollar (USD) before crashing, first to 1.32 and later to as low as 1.18 versus the USD when the "Leave" victory became apparent. The euro fell 3% versus the USD on the day of the Brexit referendum and fell nearly 10% versus the USD within six months.
• Euro rallied 2% versus the USD in the week after Dutch voters dashed the hopes of Geert Wilder's eurosceptic Party for Freedom.
• Euro soared more than 10% to a two-and-a-half-year high in the weeks after Macron won the French presidential election on a platform advocating domestic economic reform and deeper European integration.
• September's German election results halted this advance after it became apparent that not only did AfD enter the Bundestag, as expected, but that Angela Merkel underperformed the polls by about 5-6% and would have to create an unwieldy coalition with the enthusiastically pro-European Greens and the Free Democrats, who oppose deeper economic integration.
• Catalonia's independence referendum led to a 1% one-day decline in the euro, further offsetting gains from the Macron victory. Ninety percent of Catalans voted to leave Spain in the referendum on October 1 that the Spanish state considers illegal and attempted to repress with force, leading to nearly 900 injuries.

Note EU-Digest: The obvious question therefore is: "if deeper unification of Europe is good for business in general , why has the Trump Administration been supporting Brexit and other nationalist movements in Europe, directly undermining European Unity?"

When will the European Union, in particular the EU Commission, EU-Parliament and member states wake up to the fact that a strong united Europe, with an independent foreign policy is not in the interest of the US, whatever they might say to the contrary.

You also do not have to be an Einstein to recognize that the US Foreign Policy has usually been based on a"divide and conquer" doctrine, with the Trump Administration now openly championing this doctrine. 

Obviously a fractured EU. would give the US a wide open playing field in Europe, with very little resistance from individual countries, to oppose major US policy decisions in a variety of areas, which could have a negative effect on the well-being of European citizens.

Yes indeed EU citizens, the motto: "United we Stand, Divided we Fall" is more important today than ever before. 

Read more: Europe: How Markets View Unity Vs. Disintegration | Seeking Alpha