When news broke out on Monday that German Chancellor Angela Merkel has failed to form a government the euro suffered losses against major currencies. Usually when there is political uncertainty the affected currencies tend to lose positions, but this week the euro surprised everyone by recovering its losses pretty quickly and moving upwards.
The euro in this case is boosted by a strong expectation amid investors that the European Union is economically strong enough to shake off any political shocks. Even the events in Catalonia did not have a lasting impact on the single currency, so analysts don’t seem overly worried about the situation in Germany. They trust in the ECB and its policies which would likely continue to gradually strengthen the eurozone.
In addition, the euro is boosted by a lowering dollar. The USD has been negatively impacted by disappointing economic data and political strife over tax reform in the Senate.
The euro was up to $1.1769 earlier today, in the vicinity of last week’s highs.
