Record levels of unemployment in Europe may lead to election upsets in Greece and France this weekend.  This has become a big concern for proponents of austerity in Europe since new leadership,

especially in France, will likely alter the current course of debt reduction that has been demanded by the larger European economies.    It remains to be seen whether this will prove to be the next step on the slippery slope towards nations leaving the European Economic Union and the abandonment of the euro.  If a major political party campaigns against austerity measures by stoking resentment towards other European nations, the next major election will surely see more parties leaning closer to policies that promote economic isolation and sovereign currencies.

In Canada, the GDP numbers for February showed a decline of 0.2% which should strengthen the case for the Bank of Canada to hold off on rate increases until the numbers improve.  If the European elections result in new governments that back out of previous economic agreements, we will likely see additional concern over global economic growth.  This will probably cause the Bank of Canada to hold off on rate increases until early 2013. 

The Canadian dollar remains above par and has shown decent strength over the past few weeks.  However, if the European election results scare the markets, we may see a decline as global investors rush to buy US currency vehicles as we did during the height of the European debt crisis.

Jason McLean  BSc, AMP
jason@garibaldimortgage.com