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Euro Plunges After Markel's Conservative Block Weakened by A Surge in Support for The Far Right.

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Sep, 25th 09:22

The euro tumbled against major rivals on Monday as market participants digested the outcome of the German general election held on Sunday. The result pointed to a win for Chancellor Angela Merkel’s conservative alliance with a much smaller share of the vote.

The single currency gapped down versus the dollar in early trade, sending the pair EURUSD down more than 0.3 percent to trade at $1.19100. Angela Merkel won a fourth term as German chancellor but her conservative block only took 33 percent of the vote, down 8.5 points from the 2013 election. This was the lowest level since 1949, caused by Markel’s decision to allow 1 million migrants into Germany two years ago.

Meanwhile, the country’s main far-right party, Alternative for Germany, posted a surprisingly strong result, scoring 12.6 percent in the national election on Sunday. After having narrowly missing out on Bundestag seats four years ago, the AfG, with new leadership and a campaign focused on immigration, will be the first far-right party to enter the German parliament in more than half a century.

Although Merkel’s party is still the biggest parliamentary bloc, she will have to build an uneasy coalition to form a government. The prospect of a potentially unstable coalition with the pro-business Free Democrats (FDP) and Greens weighed down the euro and stocks in the auto sector.

Several Federal Reserve speakers are scheduled to make public appearances on Monday including New York Fed President William Dudley and Chicago Fed President Charles Evans. Fed Chairwoman Janet Yellen and Fed Vice Chair Stanley Fischer are due to deliver speeches on Tuesday and Thursday, respectively.

Trade suggestion

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