The euro has rallied after the German election results, climbing to a one-month high against the pound and dollar. Meanwhile, GBP benefitted from a slump in USD, after Wall Street investors expressed worries about US stagnation.
The pound ended last week up on the dollar and the euro, buoyed by Wall Street’s misgivings and a market holding its breath for the result of the German elections. Though, it has fallen behind the euro this morning as a measure of certainty returns to European politics.
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The pound is in an unpredictable spot this week, with Europe reacting to Friedrich Merz’s electoral win for Germany’s Christian Democrats (CDU) yesterday and the looming threat of US negotiations with Russia.
Last week the UK benefitted from better-than-forecast consumer confidence numbers and average earnings data, sending the UK 3% up against the dollar compared to previous month. But there are no major planned announcements until Thursday’s report on nationwide housing prices, leaving the pound at the mercy of world events.
The immediate reaction to the German elections was to send the Euro climbing to a one-month high, up nearly 0.5% against the dollar and a quarter of a percent against the pound. Perhaps a vote of support for new chancellor Friedrich Merz’s talk of achieving “independence” from the US.
However, Merz has only a narrow coalition majority and getting any of the much-needed budgetary and governmental reforms through the Bundestag is going to be a complex ongoing challenge.
The dollar fell against the pound and euro on Friday, after a survey of Wall Street investors revealed a sharp drop in investor confidence. The S&P survey indicated near-stagnation in the private sector and the slowest pace of growth since September 2023. Thursday will see US figures on manufacturing and GDP growth rate, which could either confirm or deny those investor misgivings and have a knock-on effect for the dollar.
With Trump meeting both French president Emannuel Macron and British prime minister Keir Starmer this week to discuss negotiations with Ukraine and Russia, there is a lot of uncertainty for the markets to navigate.
