Euro remains capped below 1.1500 amid growing political uncertainty in Germany
The Euro (EUR) consolidates losses against the US Dollar (USD) on Monday, as market concerns about the sharp defeat of German Chancellor Friedrich Merz’s ruling party in state elections in northeastern Germany have offset the positive impact of lower Oil prices.
The Euro (EUR) remained below 1.1500 against the US Dollar (USD) on Monday, as political turmoil in Germany undermined the positive effects of falling oil prices. German Chancellor Friedrich Merz's center-right CDU party suffered a significant defeat in state elections in northeastern Germany, garnering only 4.9% of the vote, below the 5% threshold to gain representation in the state parliament.
This poor performance paved the way for eurosceptic and pro-Kremlin Alternative for Germany (AfD) to win the elections. Despite lower oil prices, which have the potential to relieve the Eurozone's net crude-importing economies, the Euro faced increased pressure due to the German election results. Analysts at ING maintained their target of 1.160 for EUR/USD by year-end, expecting only one further interest rate hike by the Federal Reserve and the European Central Bank this year, followed by a pause in rate hikes.
Fed Chairman Kevin Warsh's hawkish comments during his speech boosted the US Dollar, while European Central Bank President Christine Lagarde's upcoming remarks in Frankfurt and the preliminary Purchasing Managers Index figures for September could provide further clues about the direction of the Euro.
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