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Euro Flat as Tight German Election Promises Slow Progress on Forming New Govt By


© Reuters.

By Geoffrey Smith — The dollar opened flat against the euro on Monday after a narrow win for the center-left in Germany’s parliamentary elections.

Preliminary estimates show that the Social Democratic Party, a center-left party, received 26% of the vote. This is two percentage points more than the Christian Democratic bloc, which was at 26%. The party of Angela Merkel, who is retiring, looks like it will go into opposition for only the second time in 16 years. 

Fears of radical change in a new government were tempered by poor performances from the Linke far left party. It almost ruled out the possibility of joining the government.

Holger Schmieding (chief economist, Berenberg Bank Berlin) stated that the tail risk of substantial tax increases, a dense web of regulations and reform reversals, as well as a greater number of regulation, has disappeared.

The result is tight, however. To be able to control a majority of seats in the Bundestag, three parties will be required. The Greens, and the probusiness Free Democrats are the largest parties. They have indicated that they would work with any of the larger parties. It is likely that negotiations for coalition-building will prove difficult and costly. 

The euro stood at $1.1711 by 3AM ET (0700 GMT) on Friday, an unchanged level from Friday. The euro was effectively the same against sterling, at 0.8561. This is despite growing signs of economic crisis in the U.K. According to reports, over half of all gas stations in the country had run out of fuel by the weekend. This was after panic-buying erupted due to shortage reports. Boris Johnson the Prime Minister had earlier indicated that they would be allowing EU truck drivers in the U.K. temporarily. It was later reported that they were planning to deploy military drivers to secure deliveries.

As a result of Friday’s deal, the US and China tensions were slightly eased. The euro and dollar rose against the Swiss Franc. A compromise deal has resulted in Meng Wanzhou, Huawei’s chief financial officers, being released. He will then be allowed to return home to China. Meng was arrested in Canada almost three years ago, at President Donald Trump’s request.  

rose 0.3% to 0.9271 while rose 0.3% to 1.0855. 

In emerging markets, the Russian ruble hit its highest in nearly a week as prices continued to rise, while the Turkish lira appeared to find a bottom after sliding dramatically in response to a surprise interest rate cut by the country’s central bank on Thursday. fell 0.2% to 72.5972, while fell 0.1% to 8.8677.



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