(21 NOVEMBER 2017)DAILY MARKET BRIEF 2:Euro does not suffer much despite German political crisis

There is major political crisis that is happening now in Germany. Angela Merkel, the German Chancellor is unable to build a majority within the Bundestag. The coalition that Merkel was trying to build with the liberals and the ecologists has failed. This is the first time since 1949 that this occurs.

The main reason why the collation failed was the migration issue. Liberals clearly didn’t want to pursue the current politics. Some voices now declare that the Liberal party is a “light far right party”. We recall that around 1.2 million migrants have been welcomed in Germany during 2015 and 2016. There is clear willingness for more borders controls in the political German landscape.

How this political issue can be solved? Actually, Germany could be called to vote again at the start of next year even though they just voted in September. Merkel is definitely in a difficult position.

Right now, the euro has not suffered from the ongoing political crisis. Yet, the euro is down from 1.18 to 1.17 since yesterday amid uncertainties. We believe the euro should continue to go down as the correlation with Germany is significant. Problems of the first European economy are also Eurozone’s problems. 

By Yann Quelenn