There was no clear direction for most major currencies, except for the euro which was weighed down by concerns over Merkel failing to form a coalition government.
- New Zealand’s food price index dips by 1.1% vs. 0.2% decline in September
- Japan’s trade data shows slower export growth in October
- Merkel’s coalition-forming troubles weigh on EUR
Merkel fails to form coalition as FDP pulls out of talks
The biggest story of the hour is Germany’s Angela Merkel failing to form a coalition government after the Free Democratic Party (FDP) walked away from coalition talks and left the veteran Chancellor hanging.
Recall that Merkel had been trying to form a coalition between her Christian Democratic Union (CDU), Christian Social Union (CSU), the pro-business FDP, and the Green party after September’s elections.
But FDP leader Christian Lindner shared that “…there was no progress but rather there were setbacks because targeted compromises were questioned” and that “[t]he four discussion partners have no common vision for modernisation of the country or common basis of trust.” He ended with “It is better not to govern than to govern badly.” Yipes!
The Social Democrats, the second-largest party in parliament, has already bowed out of rejoining a coalition government with Merkel. This leaves the Chancellor with the option of forming a minority government or another election round.
Merkel is scheduled to meet with Germany’s President to formally announce that she has failed in forming a coalition. However, she also assured that “I will do everything to ensure that this country is well managed in the difficult weeks to come.”
Still, the prospect of a rocky road for Merkel was enough to spook some of the euro bulls.
Major Market Mover(s):
The common currency took the hardest hits on news of harder times ahead for Angela Merkel.
EUR/USD is down by 51 pips (-0.43%) to 1.1736;
EUR/JPY is down by 72 pips (-0.55%) to 131.47, and
EUR/GBP is down by 28 pips (-0.31%) to .8891.
Watch Out For:
- 7:00 am GMT: Germany’s PPI report (0.2% expected, 0.3% previous)
- 11:00 am GMT: Germany’s Bundesbank report