Market Overview

Merkel Could Align With Green Party

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The euro traded steadily above $1.35 on Monday morning after pushing above $1.36 last week. The dollar was on shaky ground as investors began to worry that the US government shutdown was having irreversible effects on the fragile US economy.

The shutdown was only expected to last a few days, however now investors see the battle between Democrats and Republicans in Congress dragging on until the two sides agree on the larger, more significant issue of raising the debt ceiling.

Related: Market Primer: Monday, October 7: The States Are Rising As Shutdown Continues

Republicans have insisted on including reforms to the Affordable Care Act within the budget agreement; however President Barack Obama has made it clear that he will not approve a budget with strings attached. The stalemate has many worried that the US could default on its sovereign debt when the October 17 due date arrives.

In the eurozone, all eyes are on Germany, where Angela Merkel is attempting to form a grand coalition after winning German elections but losing her absolute majority in the lower house of parliament. Reuters reported that the Green party is becoming a more likely coalition partner as the party is set to name a new leader on Tuesday.

Kerstin Andreae is the favorite to head the Green party and her more centrist view would redefine the party and better align with Merkel's agenda. If named, Andreae has vowed to maintain the party's focus on the environment but work together with businesses to progress.

Germany's government will remain under scrutiny until a grand coalition is formed as several large eurozone issues, like the banking union and Greece's need for further funding, are likely to be delayed until Germany's government is settled.

Posted-In: Angela MerkelNews Eurozone Commodities Forex Global Federal Reserve Markets Best of Benzinga

 

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