The Euro held firm against major currencies in the last week of November, as the currency managed to achieve a two-month high against the US dollar. The strong showing of the Euro is due to the reduced anxiety regarding political instability in German.
According to the Ifo Economic Institute, the German business confidence achieved an all-time high last November that is an indicator of strong growth in the biggest economy among EU members.
Better German Business Confidence
The market was upbeat after some positive developments in the German political arena. Chancellor Angela Merkel’s chance for another term suffered a huge blow with the continuation of the three-way coalition talks between the Greens, Free Democrats, and Social Democrats.
Due to the latest developments, there were fewer worries about political instability in the country that can affect the value of the currency. On top of the three-way talks, the conservative party also started talks of a grand coalition with the SPD. The SPD refused initial talks of a coalition, but it seems like their leadership has changed its mind.
With no worries about the political future of Germany, the Euro continues to maintain its strong position against other major currencies. Political stability is important to ensure the strong showing of the single currency.
The GDP of the country rose by 0.8 percent during the quarter. That is another positive indicator for the German economy. That’s also the reason why investor morale improved in November. Investors also describe the economy as highly encouraging.
Weak Dollar
The Euro managed to maintain its high value because of the weak dollar. The United States is suffering from low inflation that undermines the rate hikes of the Federal Reserves. Currency market players are also monitoring the Congressional hearing on Jerome Powell, President Donald Trump’s nominee for Fed Chair.
Traders are also keeping an eye on the tax reform initiated by President Donald Trump. The president met with the Republicans in the Senate to discuss their party’s efforts to pass the tax reform law. Both chambers need to approve the new tax reform legislation, and that will take a lot of time and effort.
US producer prices increased 0.4 percent in October. However, the strong producer price didn’t result in higher consumer prices due to the weakened ratio between PPI and consumer price index.
The Future of the Euro and the German Economy
The rally of the Euro on the foreign currency market started in September when it achieved 1.2 on a dollar, a level the currency hasn’t achieved since January of 2015.It is due to Germany being one of the strongest economies on the planet. German businesses managed to hold down their costs and persuade the German workforce to accept restraint.
As long as German’s economy maintains its stability, the Euro will continue to be strong. The coins in your piggy bank will maintain their value in the near future due to the country’s super competitive nature.