Merkel coalition hopes drive euro higher

Hopes of a coalition deal in Germany have helped push EURUSD to a new three-year high. Meanwhile, the stronger pound has proven a shackle on the FTSE 100, with the FTSE 250 outperforming its bigger counterpart.

• FTSE 250 outperforms FTSE 100

• GKN gains 24% after takeover offer

• EURUSD at three-year high after German coalition hopes are raised

The FTSE has managed to carve out a marginal gain, as the continued resurgence of the pound proves once again to be a hindrance for the FTSE 100. The outperformance of the UK focused FTSE 250 over its internationally focus rival remains a reminder of what impact the appreciation of sterling has upon market valuations. Topping the charts is GKN, which rejected a takeover offer from Melrose, with the GKN share price jumping 24% to surpass the takeover offer of 405p. While investors may be hoping for another, improved bid from Melrose, it is clear that GKN has other plans, with the firm implementing a transformation plan that is expected to drive profitability for the year ahead.

The euro has been the big outperformer this morning, with EURUSD hitting a new three-year high at the prospect of a German coalition deal to keep Angela Merkel in power. Merkel is one of the biggest proponents of the eurozone project, and her ability to remain in power will be key to ensuring stability as we go forward. While a deal is not across the line, the sands seem to be shifting in favour of a positive, stable resolution which is expected to remove a significant degree of uncertainty for euro traders.

Ahead of the open we expect the Dow Jones to open 101 points higher, at 25,676.