The euro shows limited movement in Friday’s session. Currently EUR / USD is trading at 1.1701, down 0.16% on the day.
Elections in Germany are inconclusive
The Germans have gone to the polls, but federal election results remain unclear and the political picture could remain muddy for several months. Angela Merkel’s Christian Democrats (CDU) and the main opposition Social Democrats (SPD) are almost tied, meaning that a third party will have to be included to form a coalition government. The most important conclusion for financial markets is that Merkel, who is stepping down as Chancellor after 16 years, will remain in power until a new government is formed. Markets are happy for Merkel to stay, and EUR / USD has shown movement since the election.
Merkel can help keep the euro and financial markets stable, but at some point she will soon be replaced. If the SDP formed the next government, Germany would take a significant step to the left, which could mean higher taxes and a less friendly attitude towards big business. Business and investors alike wish the conservative CDU the best of luck, hoping they can pick up the torch from Merkel and keep Germany firmly on its current fiscal and economic trajectory. However, if the CDU finds itself on the outside when forming a new government, it could result in a loss of confidence in Germany as well as in the euro.
In the United States, this week’s key release is third quarter GDP later this week, with a forecast of 6.6%. This would be a repeat of growth in Q2 and would be a reliable indication that the recovery is continuing at a strong pace. A strong GDP release will raise expectations that the Federal Reserve will hit the cut button by December, which could give the US dollar a boost.
EUR / USD Technical
On the upside, EUR / USD faces resistance at 1.1757 and 1.1791
Support is weak at 1.1685. Nearby is the next support line at 1.1649