20 November 2017
On currency markets the euro fell after Merkel’s attempts to form a new government for Europe’s biggest economy collapsed — plunging Germany into a crisis that could see it hold fresh elections.
The leader of the pro-business FDP, Christian Lindner, walked out of talks, saying there was no “basis of trust” to forge a government with Merkel’s conservative alliance CDU-CSU and ecologist Greens.
There are fears the country could be gripped by months of paralysis with a lame-duck government, while Merkel’s political future has also been called into question.
“The news is negative for the euro, but its longer-term implications are not clear yet,” Mansoor Mohi-uddin, head of currency strategy in Singapore at NatWest Markets, told Bloomberg News.
However, while the euro has taken a hit, Stephen Innes, head of Asia-Pacific trading at OANDA, said he doubted the sell-off would be sustained.
“Liquidity is exceptionally thin and could exaggerate moves. But this knee-jerk reaction does look a bit overdone as Merkel can still establish a minority government with either the FDP or Green Party,” he said.
Oil prices were mixed but both main contracts managed to hold on to Friday’s surge that came after crude giant Saudi Arabia’s energy minister Khaled al-Faleh said he remained committed to an OPEC deal to limit production.