The U.S. Dollar recouped some of its losses over the weekend after losing ground through all of last week.
Headlines highlighting doubts over how successful Chancellor Angela Merkel’s governing coalition could be hit the wire and slowed down the Euro’s rapid surge. Political instability in the region’s largest economy seems to be the only item with the influence to drive Euro negative.
Equity markets and futures keep pointing up as large companies and banks such as Citigroup get ready to deliver their earnings reports. Uncertainty over a budget agreement in congress is scaring investors. The budgetary talks are likely to continue and members may vote to extend the deadline from January 19th to mid-February. Plenty of data is scheduled to be released in the next few days with Industrial Production likely to have the biggest impact tomorrow.
The Euro snagged its winning trend after news broke that German coalition-building has obstacles from the Social Democrats. Apparently the Berlin Chapter voted against beginning formal negotiations with Merkel’s Christian Democrats. Outside of the disappointing political challenges, the Euro faces little obstacle to appreciation since the European Central Bank is confident in its monetary approach and data only proves them right in their assessment. This hiccup for the shared currency could go away, but the idea of a snap election or no coalition could have its repercussions long-term.
The Pound retreated after underwhelming inflationary data, which showed that consumer-price growth may have already peaked. Annual inflation declined to 3.0% after reaching 3.1% in November. The economy has shown signs lately of cooling down and the prospects of problems with companies fleeing are all playing against Sterling. We shall see if Consumer Price Index is the first in a line of indicators that could paint an ugly enough picture of the U.K. that could bring Pound down further. GDP is out next week.