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Euro Tumbles on Rumors that Merkel May Resign

Last updated 1/15/2010 4:00 AM ET (GMT -5) 3 Comments

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Boris Schlossberg

Director of Currency Research, GFT

Euro tumbled through both 1.4500 and 1.4400 levels in early morning European trade on speculation  that German Chancellor Angel Merkel was about to resign. The German government immediately denied the rumors, but the pair remained under heavy pressure as fear about  political turmoil and uncertainly in Europe’s largest economy swept through the currency market.

Ms. Merkel was re-elected with a clear majority on September 27 ^th of last year, but has seen her popularity slip by 11 percentage points since that time amidst squabbling with her center right coalition partners. However her approval rating remains relatively high at 59% and she is considered to be the anchor of the European leadership, credited with guiding Germany through the financial crisis with minimal economic impact.

Although we doubt that the rumors about Ms. Merkel will turn out to be true, currencies are political as well as economic instruments and tonight’s news triggered a typical reaction in the market of “sell first ask questions later.”  With Mr. Trichet’s dovish commentary from yesterday  already weighing on the unit, tonight’s price action was exacerbated by a slew of stop running, but the pair appears to have temporarily settled  at the 1.4400 figure and may consolidate here for the rest of the day as markets eye the developments in Germany.

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Comments (3)

milanh-fx

January 15, 2010 at 01:56 PM ET

Interestingly, when Angela declined to comment this at all, nothing happened with eur usd.
Milan

schultzz.at

January 15, 2010 at 02:47 PM ET

If I hear these kind of rumors I ask Dr. Watson for advice. And what is he telling me? Fundamentals are driving prices.
Tom Schultz.

Newbegin

January 17, 2010 at 02:29 PM ET

And I saw no tumble after she sais she wasnt resigning

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.