Euro Falls After German Election Raises More Questions Than It Answers

As expected, the euro came under pressure in early trading.

Following the results of the German election (which, in case you missed it, produced the expected win for Angela Merkel, but showed a notable decline in support for the establishment parties) the single currency is falling as traders ponder the coalition building process and fret over the better-than-expected showing from AfD, which is set to become the first far-Right party to enter the Bundestag in nearly six decades.

Here’s EURUSD (panned out to give you some context vis-a-vis the move that accompanied the hawkish lean from the Fed on Wednesday):

GermanyEURUSD

And here’s the euro against the safe havens:

FrancYen

To let UBS Wealth Management chief investment officer for Germany Maximilian Kunkel tell it, the franc may well be one of the main winners here. “The Swiss franc has over-extended its move to the downside against the euro, so there will be strength again because people will realize that there are still some structural issues in Europe that have not been addressed by the main leaders,” he tells Bloomberg, adding that “most likely you will get some Swiss franc support on the back of those results.”

So the knee-jerk is as expected. We’ll now await the broader reaction in a few hours.

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