Monday September 19, 2005 - 07:34:23 GMT
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CMC Markets - www.cmcmarkets.com
Indecisive German election result leaves Euro to test lower levels.
September 19th - Many traders had been hoping that Angela Merkel would win the weekend’s German election on the basis that economic reform would prove good for both the country’s embattled economy and the Euro. However, although the result was in line with these expectations, the margin is too slim to offer any workable majority even with a coalition and the ongoing confusion as to what happens next does seem to threaten exposing the common currency on the downside. As a result of this, the Euro has started the week against the dollar down at levels previously tested in mid-August and a move on 1.2100 may yet prove imminent with a raft of economic data due in coming days from both sides of the Atlantic. Tomorrow sees both the German ZEW survey and US interest rate decision, both of which still have the potential to hold something of a surprise. However, despite Friday’s downbeat Michigan sentiment reading, expectations are for the FOMC to add another 25 basis points tomorrow so any shortfall in the ZEW – combined with the general political uncertainty that’s now in the market – could lead us back to a sustained move below 1.20. This was last seen in early July and assuming interest rate divergence is going to continue, perhaps represents a more accurate value for the Euro.
Wayne Roworth and Enis Mehmet
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