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EUR AUD Remains Subdued as Merkel Faces Tougher Political Landscape

The Euro Australian Dollar (EUR AUD) exchange rate continued to struggle this morning as investors remain dejected in the wake of Germany’s recent election.

Euro (EUR) Muted as Merkel’s Authority Threatened by Election Losses

The Euro remained subdued in trade this morning as Angela Merkel’s losses in the German election over the weekend is likely to weaken her power, especially following the AfD gains which could push legislation in the country further towards the right.

Adding to investors’ concerns is that this comes at a time when Germany is increasingly looked to by the rest of the world amid the uncertainty posed by Trump’s US administration, Brexit and Russia’s involvement in Eastern Europe.

Many fear that the undermining of Merkel’s authority in the recent election may make it difficult for the Chancellor to meet the expectations that many have placed on her to lead the liberal world in an increasingly difficult political landscape.

Further weakening the Euro this morning was the release of the France’s latest Business Confidence, with the sentiment index unexpectedly slipping from a near-decade high of 111 to 110 in September.

Analysts suggest that the dip may show that the honeymoon period between businesses and the newly elected President Emmanuel Macron may finally be over, with firms not focused on whether he can actually deliver upon his promised reforms.

Australian Dollar (AUD) Advance Hampered by North Korean Tensions

Meanwhile the Australian Dollar struggled to take advantage of the weakness in the Euro in overnight trade as investors remain wary of the riskier ‘Aussie’ amidst renewed tensions on the Korean peninsula.

The most recent surge in tensions comes as Ri Yong Ho, North Korea’s foreign minister claimed that US President Donald Trump recent comments were a ‘declaration of war’ on the secretive state, adding that Pyongyang would seek to shoot down US strategic bombers outside of its airspace.

Ri told reporters in New York on Monday;

‘The whole world should clearly remember it was the US who first declared war on our country. Since the United States declared war on our country, we will have every right to make countermeasures, including the right to shoot down United States strategic bombers even when they are not inside the airspace border of our country.’

While the US was quick to release a statement calling the claims ‘absurd’ the latest escalation in the war of words between Washington and Pyongyang is doing little to reassure world leaders or financial markets, with the UN warning that such fiery rhetoric could lead to fatal misunderstandings.

EUR AUD Forecast: French Consumer Confidence to Slide?

Looking ahead the EUR AUD exchange rate may remain on the back foot tomorrow should France’s Consumer Confidence index also have slipped in September as some analysts suggest.

Meanwhile the Australian Dollar is likely to continue to be influenced by external factors such as geopolitical uncertainty and commodity prices over the next couple of days due to a lull in domestic data.

Current Interbank Exchange Rates

At the time of writing the EUR AUD exchange rate was trending around 1.4929 and the AUD EUR exchange rate was trending around 0.6696.