Euro Drops Against US Dollar Despite German Coalition Deal

The euro today dropped significantly against the US dollar despite Angela Merkel‘s CDU party reaching a coalition deal with the social democrats in the early European session. The euro’s initial decline was largely triggered by weak German industrial production data released earlier today.

The EUR/USD currency pair lost over 70 points to drop from a daily high of 1.2406 to a low of 1.2324 at the time of writing.

The currency pair’s initial decline was triggered by the release of weak German industrial production data for the month of December by the Federal Statistical Office. German industrial production contracted by 0.6% leading to an annualized figure of 6.5%, which was lower than the expected 6.8% print. The announcement of the coalition deal in the early European session could not reverse the currency pair’s decline as investors had already priced in the development. Speeches by the European Central Bank‘s Sabine Lautenschlager and Daniele Nouy could not boost the single currency.

The European Commission‘s Winter 2018 economic forecasts had minimal impact on the pair. A speech by the US Federal Reserve’s Robert Kaplan in Frankfurt during the mid-European session provided a brief respite to the currency pair. However, the pair headed lower after the release of the positive US Mortgage Bankers Association mortgage applications data, which recorded a 0.7% increase as opposed to the previous 2.6% contraction.

The currency pair’s future performance is likely to be affected by tomorrow’s German trade balance data and the US initial jobless claims report.

The EUR/USD currency pair was trading at 1.2336 as at 14:45 GMT having dropped from a high of 1.2406. The EUR/JPY currency pair was trading at 134.69 having declined from a high of 135.75.

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