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Euro boosted by German coalition decision

Published: Monday 15 January 2018

  • Sterling also stirs
  • Not much data today – but watch out later in the week…
By  Charlie Horsley

Euro boosted by German coalition decision
EUR-USD powers through the 1.21 handle today on the news that German Chancellor Angela Merkel has achieved a breakthrough in forming the new coalition government. It's reported that Merkel has struck a deal with the Social Democrats to formally open talks for reforming the Grand Coalition. Merkel said after the talks that "we have felt since the elections that the world will not wait for us, and in particular regarding Europe we are convinced we need a new call for Europe". She also noted that "there will be difficult tasks to come" and, "the coalition negotiations probably won't be easier than the exploratory talks."
The EUR-USD firm break through the rate of 1.2091 resistance today indicates the start of another medium term rise from 1.0339. It looks as though this exchange rate could continue to increase as the US Dollar Index is now at a three year low.
Sterling also stirs
The Pound, which had a lacklustre start to the year, has strengthened on the back of reports that Spain and the Netherlands are willing to back a soft Brexit deal.  Both countries have close trade and investment ties to the UK and would be concerned about the impact of additional tariffs. Caution is advised, as they are only two members of the 27 that need to agree, so this may not mean a great deal. Nevertheless, this has served to give Sterling the confidence it needed to rise significantly and the Pound is now at the highest rate against the US Dollar since the day of the EU Referendum.
Not much data today – but watch out later in the week…
Today is light on data, but key reports will pick up as the week goes on. 
  • Tomorrow, we have the UK Consumer Price Index – an important indicator for the UK economy.
  • On Wednesday, we have the Canadian Central Bank interest rate decision – this always has the potential for surprises and the Canadian Dollar has been suffering recently, so watch this space…
  • On Thursday, there’s Australian Employment Figures – which should be key for the Australian Dollar.
  • We also get the latest Chinese Gross Domestic Product (GDP) figures on Thursday, which, as a result of important trade ties, could also have an impact on the US, Australian and New Zealand Dollars, in particular.
“What would you attempt to do if you knew you could not fail?” – Unknown
“It is never too late to be what you might have been” – George Eliot
“Do what you can, where you are, with what you have” – Teddy Roosevelt
“Either you run the day or the day runs you” – Jim Rohn

Today's Major Economic Releases

Market BST Data/Event Previous Expected
USD All day US: Bank Holiday    
EUR 10:00 EU: Trade Balance 19.0b 22.4b
NZD 21:00 New Zealand: NZIER Business Confidence 5 5

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