Merkel deprived traders of any hopes for the strengthening of the euro
Recent events unfolding in German politics can have a huge impact on the entire eurozone. The single currency has almost no chance of strengthening. German Chancellor Angela Merkel, who was associated all these years with a stronghold of stability in the region, upset the “bulls” of the euro. The currency may end this October at the lowest level since May, after announcing that the Chancellor will not run for the party leader’s new term of office in December. Merkel also will not run for office as chancellor in 2021..
Note that since the beginning of the year, the euro has fallen by more than 5% and has confused many analysts and experts who foreshadowed the rally.
The yield on German bonds rushed up amid expectations that the country’s spending will grow after Merkel’s departure, which, according to the Crossbridge Capital, is unlikely to remain as Chancellor until the end of his term. There is no clear successor, and this only increases investor anxiety.
The market sighed with relief about the fact that the agency S & P Global Ratings maintained the rating of Italy, lowering the outlook for the country from one of the highest debt burdens in the eurozone. The statement of Angela Merkel that followed immediately made traders feel the tension again.
Investment managers have seen in Merkel a leader who can solve the problem of migration and cope with the challenge of leaving the UK from the EU.
“For the European Union and the eurozone, only weak Germany can be worse than a strong Germany. With the departure of Merkel, the EU will lose the only political leader who, it seems, has enough weight and experience to keep the union from collapsing, facing one or another crisis. The EU may lose its unity and direction, which will result in serious social consequences for the entire continent, “says Manish Singh, investment director of Crossbridge Capital in London.