Euro ebullient following German coalition progress, dollar in decline ahead of inflation data
The euro was pretty damn ebullient this Friday following the news that Angela Merkel’s CDU were moving to the next stage of their German coalition talks with the Social Democrats.
Combine that with the lingering effects of yesterday’s ECB meeting minutes, which were read to be hawkish by investors, and the euro rocketed 0.8% higher against the dollar, taking it to a brand spanking new 3 year peak. Initially any potential positives for the DAX were all being absorbed by the euro; however, as the news sank in the German index became a bit more receptive, rising 0.3%.
The dollar’s issues weren’t just against the euro – the greenback also plunged 0.7% against the pound, allowing cable to tease its own 4 month high. It appears the dollar was softened up by yesterday’s disappointing US PPI reading, allowing fears over the prospective dip in both inflation, expected to fall from 0.4% to 0.1% month-on-month, and retail sales, forecast to drop from 0.8% to 0.5%, to take hold this Friday. Of course the Dow Jones’ many multinationals are more than fine with the dollar’s decline, putting the US index on track for a 25700-tickling half a percent climb when the bell rings on Wall Street.
Despite cable’s gains, the 25% surge seen by GKN (LON:GKN) – which rejected an unsolicited takeover bid by Melrose (LON:MRON), only for the latter to state it would be back – and the reversal of early losses in the commodity sector allowed the FTSE to eke out a 0.2%. That leaves the UK index at a record peak of 7780, around 50 points higher than where it started the week.
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