Market Overview

Euro Slips On Weaker Than Expected German Data

Euro Slips On Weaker Than Expected German Data

The euro slumped against the dollar on Wednesday after German data on Tuesday came in weaker than expected. The common currency slipped below $1.35 and traded at $1.3473 at 6:30 GMT on Wednesday morning.

Reuters reported that the German business climate index came in at a 17 month high, but was below expectations which weighed on the euro. Most see Germany, the largest economy in the eurozone, as the region's engine, so disappointing data from the nation has a large impact on the currency.

Related: Market Primer: Wednesday, September 25: Investors Hesitant, US In Focus

The business climate survey was closely watched after European Central Bank President Mario Draghi spoke on Monday about the bank's commitment to keeping interest rates low. Eurozone economic data will be under the microscope now that Draghi has indicated a willingness to provide more cheap long-term loans in an effort to keep money market rates from increasing.

Adding to the weight on the euro, ECB Governing Council Member Ewald Nowotny reiterated Draghi's remarks on Tuesday. Nowotny said it was too soon for the bank to pull away from its crisis measures.

Signs that a German coalition government will take longer than expected also pressured the common currency. Although Angela Merkel won the election, her junior coalition partner was replaced in the lower house of parliament, which leaves Merkel to find a new partner. The Social Democrat party is the most likely option, however the party is resisting due to a failed partnership during Merkel's first term.

On Friday, the SPD will hold a meeting to discuss whether or not to enter in to coalition talks with Merkel. Even if the party goes ahead with preliminary coalition talks, there is no guarantee that the two sides will see eye to eye, so the partnership would be far from guaranteed.

Posted-In: European Central BankNews Eurozone Commodities Forex Global Federal Reserve Markets Best of Benzinga


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