The euro neared its highest point in seven months against the US dollar on Monday, after Angela Merkel won an overwhelming endorsement from voters in Germany on Sunday.
EUR/USD hit a session high at 1.3544 at 6:00 GMT, after which consolidation followed at 1.3540, gaining 0.13% for the day. Support was to be found at psychological level of 1.3500, while resistance was to be met at September 19th high and also the highest point since February 7th, 1.3567.
Yesterdays elections in Germany showed that Angela Merkel’s Christian Democratic bloc won 41.5% of the vote and 25.7% was won by the Social Democrats of Peer Steinbrueck, according to results from all 299 districts, Bloomberg imparted. This was a secured third term in office for Merkel. Her party, however, did not achieve a majority and political leaders were due to hold a discussion today over a possible coalition.
“This is a vote in favor of Merkel rather than a vote in favor of big changes,” said Steven Englander, Citigroup Inc.’s global head of G-10 currency strategy in New York, cited by Bloomberg. “It’s most likely Merkel will govern in a grand coalition with the Social Democrats, so that’s a slight euro positive because the government would be somewhat more friendly to the peripheral nations in the currency bloc.”
In addition, the European Central Bank President Mario Draghi is expected to take a statement in Parliament today, as market volatility is usually high during his speeches.
Meanwhile, the US dollar was still under pressure after last Wednesday the Federal Reserve Bank did not introduce a change in its stimulus program. Federal Open Market Committee (FOMC) voting member William Dudley is expected to speak today, following comments made by Bank of St. Louis President James Bullard on Friday, who said that Feds decision not to taper in September was “close” and also indicated a possible move towards a small reduction in asset purchases in October.
Later in the day the Euro zone will release data on the preliminary value of PMIs in the sector of manufacturing and services.
Elsewhere, the euro was steady against the pound, with EUR/GBP cross dipping 0.02% to trade at 0.8443 at 7:07 GMT. EUR/JPY pair was losing 0.15% to trade at 134.14 at 7:08 GMT.
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