The euro fell today, retreating for the second day in a row, as the inconclusive outcome of the German federal election over the weekend led to political uncertainty in Europe.
Christian Democratic Union party of German Chancellor Angela Merkel won the election, as was widely expected, but gained just a third of votes — the worst result in almost 70 years. Their main opposition Social Democratic Party was the second, but had the worst result on the record. At the same time, far-right euro-skeptic Alternative for Germany party came third, garnering more support than in the previous elections.
The outcome of the voting means that Merkel will need to create coalition. Analysts are worried that may hurt not just German Chancellor’s power, but plans of French President Emmanuel Macron for closer ties between European countries.
European Central Bank President Mario Draghi also hurt the euro by his yesterday’s speech. He signaled that the ECB is not in a hurry to start reducing monetary stimulus, saying that “a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialise.”
EUR/USD dropped from 1.1846 to 1.1787 as of 12:33 GMT today. EUR/JPY declined from 132.36 to 131.95. EUR/GBP wend down from 0.8796 to 0.8782, touching the low of 0.8753 intraday.
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