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Weekly roundup: Focus on German coalition talks keeps EUR on choppy form

currency-newsWeekly roundup: Focus on German coalition talks keeps EUR on choppy form
The ongoing coalition talks – or lack of – between German Chancellor Angela Merkel and the Social Democratic Party (SPD) remained a primary cause of euro uncertainty last week, helping keep EUR exchange rates on choppy form.

Things started well on Monday, when EUR received a boost from the release of more details regarding the negotiations being held, as well as data showing a widening Eurozone trade balance in November.

However, expectations quickly cooled on Tuesday when the SPD’s Berlin division voted against formally beginning negotiations with the CDU as outlined in the plan presented before the weekend.

Inflation data on Wednesday showed that core price growth held firm at 0.9% as expected; better than a slowdown, but still a rather unimpressive result given that the European Central Bank (ECB) has a target of just under 2% for price growth.

Germany was back in focus on Thursday, after an SPD official stated there was no ‘plan B’ should negotiations with the CDU fall through, which means Germany could potentially be left without an operating government.

There is plenty of new data for traders to price-in to the euro this week, starting tomorrow with the ZEW economic survey results for Germany and the Eurozone.

Wednesday’s slew of PMIs from Markit could undermine the euro, given that the forecasts are for the indices to have edged lower across the board.

On Thursday the ECB will announce its latest monetary policy decisions and there will be a chance for markets to gauge the mood amongst policymakers during a press conference with President Mario Draghi.
 
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