Not only was there a political bang in the US yesterday, but also in Germany late last night. After Chancellor Olaf Scholz fired Finance Minister Christian Lindner, the so-called “Ampelkoalition” (a coalition between the Christian Democrats, the Social Democrats and the Greens) is now history, Commerzbank’s FX Analyst Antje Praefcke notes.

Euro can quickly recover short term

“Will the lights go out in Berlin now that the coalition has broken up? Hardly likely. The most likely scenario is a minority government followed by new elections in March. But even then, forming a government will likely be difficult. The euro has not yet reacted to the events in Germany. This could still happen when trading starts in Europe, as political uncertainty in the largest country in the euro zone is certainly not positive news for the single currency.”

“However, the consequences are likely to be limited. For a start, the political turmoil in Germany would have to lead to considerable negative economic consequences that have a significant impact on growth in the euro zone and thus influence the ECB's monetary policy to such an extent that it lowers the key interest rate more than expected. However, this is not to be expected (at least not at the moment).”

“The fact that the euro zone will only make sluggish economic progress in the coming months, due in part to weak growth in Germany, is likely to be already largely priced into the euro. As long as it is not clearly foreseeable that the euro zone will see lower trend growth in the future than previously expected, sustained losses in the euro are unjustified. As a result, the euro should only react briefly, if at all, to the news from Berlin, but should then quickly recover.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

GBP/USD rebounds to 1.2950 area despite BoE rate cut

GBP/USD rebounds to 1.2950 area despite BoE rate cut

GBP/USD trades in positive territory near 1.2950 on Thursday. Despite the Bank of England's (BoE) decision to cut the policy rate by 25 basis points, Pound Sterling holds its ground after BoE Governor Bailey noted that the rate path will change due to the budget.

GBP/USD News
EUR/USD clings to gains above 1.0750 amid US Dollar pullback

EUR/USD clings to gains above 1.0750 amid US Dollar pullback

EUR/USD holds higher ground and trades above 1.0750 on Thursday. The pair finds support from a broad US Dollar retreat, as traders unwind their Trump win-inspired USD longs ahead of the Federal Reserve's highly-anticipated policy announcements.

EUR/USD News
Gold recovers above $2,670, awaits Fed rate decision

Gold recovers above $2,670, awaits Fed rate decision

Gold recovers following Wednesday's sharp decline and trades above $2,670. The benchmark 10-year US Treasury bond yield edges lower after Trump-inspired upsurge, allowing XAU/USD to hold its ground ahead of the Fed policy decisions.

Gold News
Federal Reserve expected to deliver 25 bps interest-rate cut, shrugging off Trump victory

Federal Reserve expected to deliver 25 bps interest-rate cut, shrugging off Trump victory

The Federal Reserve is widely expected to lower the policy rate after Donald Trump won the US presidential election. Fed Chairman Powell’s remarks could provide important clues about the rate outlook.

Read more
Outlook for the markets under Trump 2.0

Outlook for the markets under Trump 2.0

On November 5, the United States held presidential elections. Republican and former president Donald Trump won the elections surprisingly clearly. The Electoral College, which in fact elects the president, will meet on December 17, while the inauguration is scheduled for January 20, 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures