The Euro is likely to see additional volatility in the coming weeks after German Chancellor Angela Merkel finishes preliminary talks with Germany’s second biggest political party Social Democrats (SPD) later today. After talks broke down trying to form the so called Jamaican coalition with the Greens and the Free Democratic Party (FDP), this is now a final attempt to re-establish the grand coalition of before. If enough common ground can be found between these two parties then talks will move forward to formal coalition negotiations with a view to see a new government in place by March or April. Today should give the markets considerable more clarity as to where all of this is heading and the Euro is likely to react.
After the inconclusive elections in September Germany has been left with a political deadlock for four months and it is still uncertain whether or not an agreement can be reached. With public support for a grand coalition at low levels there is still a high chance that Merkel may have to form a minority government although this would most likely be seen as unstable and could be negative for Euro exchange rates.
The pound meanwhile is back under pressure against the Euro as Brexit uncertainty continues to be a major driving force for sterling exchange rates. GBP EUR has fallen to below 1.13 coming off a five week high seen at the start of this year. It’s not all negative for the UK though, the National Institute for Economic and Social Research released its Gross Domestic Product estimate yesterday which arrived higher than expected at 0.6% rather than the 0.5% which was expected.
Clients looking to buy or sell Euros would be wise to get in touch to discuss specific requirements to try and take the risk out of the volatile currency markets. Please get in contact with me James at firstname.lastname@example.org and I will be happy to assist.