The Euro rose on Monday after Germany’s conservatives won national election, while the US dollar fell as doubts about the US economy grew. Friedrich Merz is set to become the next chancellor of Germany, but the path to forming a coalition is unlikely to be straightforward, least of all after the far-right Alternative for Germany (AfD) came second.
The Euro rose by 0.46% to $1.0508 as investors waited to see how quickly Merz can put together a coalition to shore up Germany’s shaky economy. Market experts warn that the fragmented political environment may slow down necessary changes.
“As we have seen, coalition talks are going to be tough, and economic changes may be slow in coming,” explained a market analyst.
Meanwhile, the US dollar continued to fall as the mood turned dimmer regarding the health of the American economy. The dollar index slid 0.2% to 106.34, as pressures mounted from falling U.S. Treasury yields and expectations of more Fed rate cuts this year.
Slowing U.S. business activity data also added to the woes as it pointed to a loss of momentum during the current administration’s tenure. The market is now eagerly waiting for this week’s important economic data such as core PCE price index and fourth-quarter growth report.
Other currencies also moved in the broader market; sterling continued to trade close to a two-month high of $1.2659, the Australian and New Zealand dollars edged up, and the yen rose as well due to expectations of the Bank of Japan’s rate increase.
Euro’s increase can be attributed to investors’ optimism regarding Germany’s capacity to achieve economic stability despite the political risks pending in the country.
