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German Election Aftermath keeps Euro down against the Pound

In a marked improvement, the Euro has traded tightly against the Pound today. While this has left the Euro trading at a rate of 0.8766 against the Pound, the news still means that the Euro decline is finally slowing.

This tight trading has come despite recent difficulties in forming a German coalition government. It is widely expected that the eventual leadership will be made up of the CDU/CSU, FDP and Greens, but the FDP’s leader has unsettled the situation.

Giving some of his first official remarks since the election, FDP leader Christian Linder has claimed that it is ‘up in the air’ whether his party will actually be able to form an effective government with the other presumed coalition members.

(Last updated September 26th, 2017)

The Euro has dipped lower against the Pound on Tuesday’s afternoon session, due to little relief coming in the Eurozone. Having opened trading at 0.8773 against the Pound on Tuesday morning, the Euro has since worsened to a rate of 0.8766.

Unfortunately for the single currency, Germany’s parliamentary issues are unlikely to go away for the foreseeable future. Despite this, however, the Euro could still appreciate on particularly strong Eurozone data.

This is because European Central Bank (ECB) President Mario Draghi has previously stated that political news does not factor into monetary policy decisions – traders are likely hoping that this is the case for Germany’s election.

(First published September 26th, 2017)

The Euro has failed to advance against the Pound today, after a reduced majority was reported for the CDU/CSU party after the German election.

  • EUR GBP rate down at 0.8773 – GBP EUR trades up at 1.1395
  • Euro remains soft on German election result – Long wait possible before coalition is formed
  • Pound advances on Euro weakness – PM to meet with European Commission president
  • Euro could recover on confidence data – Pound losses possible on CBI stats

Yesterday, the Euro lost ground against the Pound by falling from an opening exchange rate of 0.8825 to close near 0.8795.

Euro Slides as German Coalition Talks Begin

Germany’s shock election result remains a significant limiting factor for the Euro today, having already dragged the single currency down on Monday.

Although Angela Merkel’s CDU party remains the largest with sister group the CSU, they have lost a significant proportion of the vote to the right-wing AfD.

This means that the CDU/CSU must form a functional coalition; most analysts believe it will be with two bitter rivals – Germany’s Green party and the FDP, a left-leaning party.

Commenting on the situation was SPD Deputy Leader Ralf Stegner. While it has enough seats to reform the previous ‘grand coalition’, the SPD has instead vowed to occupy the opposition spot against the CDU/CSU.

Stegner has observed that;

‘Now we have the CDU/CSU, the Greens and Liberals (the FDP). We have four parties that have talked a lot about their ideas for modernizing Germany and now they can show whether they can do that not only in campaigns but in government’.

The latest concern is that coalition talks could take months, with a deal not being reached until December. For context, the pervious CDU/CSU and SPD grand coalition took 86 days to create back in 2013.

Pound remains Firm as PM and EC President meet for Brexit Discussion

On a week set to be dominated by Brexit news, the Pound has maintained a 0.3% advance against the Euro.

The Pound’s strength primarily comes from the Euro’s converse decline, given that positive UK news has been lacking so far.

The latest development in the Brexit process has been that Prime Minister Theresa May will be meeting with European Council President Donald Tusk today.

An ongoing issue in Brexit talks has been apparent differences between UK and EU negotiators, with the UK not committing to paying a so-called ‘divorce bill’.

This has seemingly held up negotiations, something that May’s previous speech in Florence was supposed to resolve.

If the PM comes to an understanding with Tusk today then the Pound could appreciate, as it would imply that Brexit talks are back on track.

Weekly Euro to Pound Forecast: EUR Recovery Possible on Confidence Stats

While the Euro has had a bad start to the week, it may be able to make a recovery closer to Friday.

Thursday’s key data will consist of German and Eurozone-wide confidence scores for October and September. The early German consumer confidence result is expected to rise marginally from 10.9 points to 11.

Later in the morning, overall Eurozone confidence measures will come out. In key areas such as consumer confidence and business confidence, improvements have been forecast.

The next notable UK data will come earlier on Wednesday, covering reported Confederation of British Industry (CBI) distributive trades.

Unfortunately for Pound traders, forecasts are for the level of trades to remain low in September.

This could devalue the Pound, ahead of Thursday’s high-impact speech from Bank of England (BoE) Governor Mark Carney.

Current Interbank EUR GBP Exchange Rates

At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.8773 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1395.