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Week in FX Europe – Merkels Win No Slam Dunk

On this side of the Atlantic it has been eerily quite about this Sunday’s German federal election. It’s has always been considered a Merkel done deal. It most probably is, however event risk does appear and it should. The German election is seen as an indicator of Europe’s future, but as many analysts have noted, Europe has rarely been mentioned. The obvious reason being that all the parties agree with Merkel’s stance of “no alternative to the government’s rescue operations.” It would be difficult to argue with this – to date Merkel’s policies have worked.

A continuation of the center-right coalition or a grand coalition is considered the punters best outcome. The Euro observers are also interested in whether the AfD party will achieve the parliamentary mandate of +5% – the polls say “Ja.”

It seems that the majority expects Merkel to take the reins again come Sunday evening – she could win with another junior coalition partner, but there is an equal chance of her winning a “grand coalition.” However, if she fails to achieve the parliamentary threshold and form a coalition government, it’s back to the drawing board where much haggling will occur.

A Grand coalition is positive for Europe, while a center left coalition is probably slightly negative. No matter what, by Monday morning most of us will have a better understanding of German politics.

WEEK AHEAD

* USD Consumer Confidence
* USD Durable Goods Orders
* GBP Gross Domestic Product
* JPY National Consumer Price Index
* EUR German Consumer Price Index

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell [24]

Vice-President of Market Analysis at MarketPulse [25]
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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