The Euro has advanced against the US Dollar recently and may make greater gains after the coming German Federal Election.
Over in the US, future movement could be negative as the world processes Donald Trump’s bombastic United Nations speech.
Euro Rally Possible if German Election sees CDU Strengthened
Looking to the near future, the Euro may face turbulence when Germany goes to the polls in Sunday’s election.
The federal election will decide the makeup of the country’s representatives in parliament, as well as who is actually running the country.
Angela Merkel’s longstanding CDU party has been ruling in various forms since 2005, and a number of polls predict that she will extend her tenure into a forth government.
The problem in this vote is that during the current government, the right-aligned CDU have ruled in a ‘grand coalition’ with the SPD, a left-aligned party.
The CDU are looking to break free and rule independently, or in a more compatible coalition arrangement. Unfortunately, even with the CDU on a predicted 37% of the vote and the SPD on 22%, there is no guarantee that the grand coalition will actually change.
While this could mean that the new government continues to suffer from an ideological divide, it would nonetheless maintain the status quo.
Such an outcome might lead to the Euro appreciating, as the single currency would benefit from the certainty and stability that has come to be associated with Angela Merkel’s leadership.
US Dollar could Slide if Trump’s UN Speech Backfires
For the US Dollar, future movement may be caused by any backlashes against Donald Trump’s debut speech in the United Nations.
Delivering his first major address on September 19th, Trump was roundly critical of North Korea, Iran, and to a lesser extent the whole world, which he claimed was too divided.
While talks of unity are a staple of the UN address, Trump’s stance on North Korea was far from peaceful. The President declared that Kim Jong-Un was ‘on a suicide mission for himself and his regime’, and additionally threatened that;
‘The United States…if forced to defend itself or its allies…will have no choice but to totally destroy North Korea’.
This statement, as well as one blasting the 2016 Iran nuclear deal, brought condemnation from world leaders.
If Trump’s divisive rhetoric leads to the US losing international support on issues such as resolving the North Korean situation, the US Dollar could gradually depreciate.
Recent Interbank EUR USD Exchange Rates
At the time of writing, the Euro to US Dollar (EUR USD) exchange rate was trading at 1.2008 and the US Dollar to Euro (USD EUR) exchange rate was trading at 0.8325.
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