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Euro tumbles as Merkel enters coalition talks

The Euro weakened today as German Chancellor, Angela Merkel, begins talks with the Social Democratic Party in a final attempt to form a coalition Government. After previously failing to reach an agreement with the Free Democrats and Green Party back in November, this is Merkel’s last chance to form a coalition. The SPU and Merkel’s Christian Democratic Union have been in coalition previously, however, the SPU did not want to renew the agreement after the recent election and instead wanted to be Merkel’s main opposition. However, they agreed to enter in talks again as a risk of a German snap election might result in the Alternative for Germany party gaining further support. The talks are likely to continue into Thursday.

Across the pond, the US released the Labour Data for December on Friday providing the Greenback with little much needed support. The Non-Farm Payroll figure posted worse than expected at 148k, forecasted at 252k. Average Hourly Earnings posted as expected at 0.3%, up from 0.1% last month. The Unemployment Rate remained steady at 4.1%, a 17 year low.


Today there is a quiet start to the week with no high tier data on the economic docket. Two FOMC members, Raphael Bostic and John Williams, will be speaking at two different events. The first will be Bostic on the US economic outlook and monetary policy at the Rotary Club of Atlanta. Williams will be taking part in a panel discussion at the Brooking Institution discussing whether the Federal Reserve should revise their 2 percent inflation target. In Canada, the Bank of Canada will be releasing the Bank of Canada Business Outlook Survey.


Tuesday will also be a quiet day for the markets, as no high tier data is scheduled to be released. The Eurozone will be releasing some low tier data in the form of the Unemployment Rate, forecast to post 8.7%, whilst the largest economy in the Eurozone, Germany, will be releasing their Industrial Production and Trade Balance figures. Italy will also be releasing their Monthly Unemployment rate, forecast to post 11%. Across the pond, the US will be releasing their JOLTS job openings, which is expected to post 6.05m.


Wednesday will start with the release of the UK Manufacturing Production figure, expected to post 0.3%. The Goods Trade balance is also expected to be released, forecast to post -11.0B.  Across the pond, the US will be releasing their Import Price monthly figure as well as the Crude Oil Inventories.


The Australian Retail Sales figure, will be the first release on Thursday, expected to post 0.4%. Back in the UK, the Bank of England will be releasing the Credit Condition Survey. The ECB will be releasing the Monetary Policy Meeting accounts. The markets will be looking closely at the release to try and identify the ECB’s next moves. Across the pond, the US will release the PPI and core PPI figures, both expected to drop from last month to 0.2%. The Weekly Unemployment figure will also be released expected to post 248k.


Friday will be an important day for the US as the CPI figure for December is released, alongside the Retail Sales. CPI for December is expected to drop to 0.1%, from 0.4% last month. However, the core CPI is expected to grow to 0.2% from 0.1%. Retail Sales is expected to post 0.5% down from 0.8%.