Euro Climbed After German Elections

Germany, Europe's largest economy, accounting for about a quarter of the gross domestic product of the European Union (EU) and the country with the largest Turkish diaspora, went to early elections on February 23rd. After the elections, the Euro gained value against the US Dollar and Japanese Yen in the markets and began the week with a rise. In the markets mobilized after the elections, gold has continued to gain value for the last 8 weeks. Investors are attentively following how the new German government will follow the coalition talks and how it will steer the sensitive economy. 

   Carsten Brzeski, head of ING Research's global macroeconomics department, said, "The fragmentation of Germany's political landscape will complicate the upcoming coalition talks”. There is a high risk that the yearning for a significant overhaul in the German economy will continue for much longer. It is hard to see that the next government will be able to offer much more to the economy than a short-lived positive effect from some tax cuts, minor reforms, and a little more investment." 

   Uncertainties about the future of the US economy are causing the US Dollar to weaken, while investors think that Donald Trump's trade policies may be mostly a bluff in his possible second term, thus reducing the demand for the dollar. Additionally, the decrease in US Treasury bond yields and increasing expectations that the FED will make more interest rate cuts during the year are also the reasons for the depreciation of the dollar.