Euro hits Month High after Conservatives win in Germany
The euro strengthened on Monday following the expected victory of Germany’s opposition conservatives in their national election. Simultaneously, the greenback continued to weaken due to escalating concerns about the future growth of the U.S. economy.
The conservatives in Germany won the national election, sending the euro to a one-month high and sending stock futures soaring on Monday.
Investors are waiting for more results to determine whether much-needed fiscal reform is likely.
The conservative CDU/CSU bloc received 28.5% of the vote, while the AfD received 20%, according to a forecast released late Sunday by ZDF broadcaster.
Although Friedrich Merz, the leader of the conservative party and the next chancellor of Germany, will probably have to negotiate a complicated and drawn-out coalition, investors were relieved that the election did not bring any unpleasant surprises.
The AfD, which opposes fiscal reform, did not do better than expected, analysts said, supporting the outlook.
Europe’s largest, contracted for a second straight year in 2024. Critics attribute years of underinvestment to the debt brake.
Investors see little room for reform, but as increasing defense spending becomes more urgent in European capitals, expectations for higher spending have increased recently.
The dollar lost 3% from its peak in January as traders concluded that they had little desire to increase their holdings of dollars because Donald Trump’s second term had been characterized by bluster on tariffs.
Also adding to headwinds for the dollar were falling U. S Treasury yields on heightened bets of more Fed cuts this year, amid growing concerns over the outlook for the world’s largest economy.
Data on Friday showed American business activity mildly stalled this month – the latest in a string of surveys to suggest that businesses and consumers were becoming increasingly rattled by the Trump administration’s policies.
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