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Euro snaps two-day rise after German election results

German elections

The euro snapped a two-day rising streak following German election results

German elections prompted investors to lock profits into one of the most profitable currency trades of the year ending the euro’s two-day rise. Money managers have piled into the single currency and related bets in 2017, particularly European equities, as the euro zone economy regained momentum and its monetary policy outlook diverged from its counterparts in the United States and Japan, pushing the euro up more than 13 per cent this year. However, and expert termed the impact limited as the effect of the election result is domestic rather than regional. He said that the euro will be more sensitive to any shift in direction from the European Central Bank policy.

The euro slipped 0.4 per cent to $1.1912 against the dollar on Monday but was higher against the Swiss franc and was broadly flat against the Japanese yen .

There was victory for Merkel for the fourth term but there was the rise of rightist forces. The anti-immigration Alternative for Germany (AfD) managed its way as well. Although, Merkel won the most votes, it was the worst performance by the party since 1949. Her Social Democrat coalition partners want to sit in the opposition after coming down to 20.7 per cent in projections.

In a note to clients, global chief investment officer at Credit Suisse, Michael Strobaek, said that the German election results are not a game changer for markets with the outcome likely positive for German equities.

Elsewhere, the dollar gained against a broad basket of currencies, rising 0.15 per cent on the day as investors reduced some short bets against the greenback. Latest positioning data showed short bets on the dollar against a broad basket of currencies at their highest level since January 2013.

Paul

The author Paul