Euro exchange rates got off to a bad start this week as the euro dropped, following news that Angela Merkel won’t be running for re-election.
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Although many had predicted this news, the euro still dropped as Merkel has been one of the most important political figures in Europe since she became German Chancellor in 2005. She has decided to step down after her party (Christian Democratic Union) suffered heavy losses in regional elections in the Western state of Hesse, undermining her coalition Government. The CDU slumped to just 27% of the vote which was the party’s worst showing since 1966, and the result has seen some dramatic headlines within Europe mostly highlighting her waning popularity.
A major political shift in Europe would be coming at a bad time for the trading bloc, unity is now needed more than ever with the UK’s Brexit just five months away and the Italian Government in disagreement with the EU guidelines, regarding its own monetary policy.
Last week’s EU policy update from the European Central Bank (ECB) suggested that the Central Bank still plans on ending its Asset Purchasing Programme (APP) at the end of the year, with an interest rate hike likely to come towards the end of 2019. Later this morning the EU GDP figure for the third quarter of 2018 will be released and I would expect a drop below the expectation of 0.4% to result in EUR weakness, as a slowing economy could scupper the ECB’s plans to end its asset purchase programmes.
On Wednesday the Unemployment rate will be released, a figure of 8.1% expected. At the same time EU Inflation data will be released which is another potential market mover. If you wish to be updated in the event of a major market move, do register your interest with us.
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