With September fast approaching, the focus is likely to temporarily shift from the speculation on the ECB’s next monetary policy move to Germany. Unlike the previous elections in the Eurozone, namely the Dutch and French elections, the German elections are not expected to deliver any surprising results.
At best, the elections are likely to become a Merkel versus Schultz affair. Both leaders are seen to favor further integration with the eurozone. The markets are, however, betting that Merkel’s Christian Democratic Union (CDU) will pocket another victory, with some alliances of course.
Angela Merkel was first elected as the Chancellor of Germany in 2005. She was also the first female Chancellor of Germany. The 2017 elections will see Ms. Merkel seeking a fourth consecutive term to lead Europe’s strongest economy.
Obvious by now, the volatility factor when it comes to the German election is somewhat more subdued than compared to other regional elections in the Eurozone. Still, the event could potentially bring some trading opportunities.
EURUSD – Is there more leg to the rally?
The common currency is no doubt one of the strongest performing currencies this year. The gains in the euro came mostly on the back of speculative bets. Investors are strongly inclined to believe that the European Central Bank will be tightening monetary policy in the near term.
Currently, speculation is rife that this announcement could come as early as September 7, when the ECB will be holding its next monetary policy meeting. It is also evident that the ECB’s governing council is somewhat cautious on how to communicate to the markets.
This was evident from the recent ECB meeting minutes where the topic was discussed but was eventually put off as officials wanted to time their communication correctly and to ward off any volatile market movements.
Even at the recent Jackson Hole symposium, the ECB President Mario Draghi refrained from going much into addressing the forward guidance on monetary policy. Still, the euro has remained the favorite currency this year among traders.
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