When is the German election and how could it affect EUR/USD?


On Sunday, Germans are going to be heading to the polls for a federal election, at which Angela Merkel is going to have a chance to secure her position as chancellor for a historic fourth term. Voting is going to end at 6:00 p.m. local time (4:00 p.m. GMT) and first projections are expected to come in in the next few hours after the polls close. However, the official results are going to be announced on Tuesday. 

Key notes:

Support for Angela Merkel's center-right Christian Democratic Union (CDU) was at 36% according to the latest Stern-RTL poll. "Chancellor Angela Merkel has enjoyed a comfortable and stable lead in the polls for several months. It would need a miracle or wrong polling for her not to win the elections. The second place will most likely go Merkel’s primary challenger Martin Schulz and his SPD. The race for number three, however, still remains open," Carsten Brzeski, Chief Economist at ING Bank, wrote in a report this week.

Although it won't be long before we know who came on top at the election, it might take some until a coalition government is formed, especially with Germany's rightwing Alternative für Deutschland party making a late jump in the polls and taking the third place behind CDU and SPD with 12%. The AfD party says, "Germany must reintroduce permanent border controls and the EU's external borders must be completely shut," in its manifesto. Moreover, senior politicians of the party have been vocal about being anti-euro. 

Implications for EUR/USD

If AfD receives 12% of the votes as the polls suggest, the party will secure 50 seats in the parliament and their presence in the German government might hurt the shared currency in the near-term. However, the negative effects could fade away quickly as Merkel would have a chance turn to other parties to form a coalition. "...the recent polls show that the Alternative für Deutschland may emerge as the biggest opposition party in the Bundestag. This might reel markets, but keep in mind that they are then expected to suffer the same fate as the Dutch Freedom Party, i.e. political isolation,” Rabobank analysts explain.

On the other hand, if AfD fails to come in third on Sunday, the euro is likely to rise modestly against its peers amid a relief rally. The EUR/USD pair could try to extend its gains above the 1.20 handle, but the pair's overbought-ness and the FOMC's hawkish stance could cap the upside. 1.2090 (Sep. 8 high) could be the next target, and the German election outcome by itself might not be significant enough to carry the pair above that level in the short-term. On the downside, the pair could edge lower towards 1.1860 (Sep. 20 low) and 1.1770 (Aug. 25 low) if there are uncertainties regarding the structure of the coalition after Sunday.

 

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD holds near 1.0850 after US PMI data

EUR/USD holds near 1.0850 after US PMI data

EUR/USD holds steady at around 1.0850 in the second half of the day on Wednesday. The mixed US PMI data limits the US Dollar's gains but the risk-averse market atmosphere doesn't allow the pair to gather recovery momentum in the American session

EUR/USD News

GBP/USD recovers above 1.2900 as USD struggles to gather strength

GBP/USD recovers above 1.2900 as USD struggles to gather strength

GBP/USD trades modestly higher on the day above 1.2900 on Wednesday. The US Dollar struggles to build on Tuesday's gains following the mixed PMI data for July, allowing the pair to stay in positive territory in the second half of the day.

GBP/USD News

Gold extends recovery, advances above $2,420

Gold extends recovery, advances above $2,420

Gold builds on Tuesday's recovery gains and trades above $2,420 on Wednesday. The pullback seen in the 10-year US Treasury bond yield and the US Dollar after US PMI data help XAU/USD stretch higher during the American trading hours.

Gold News

Bitcoin price volatility expected amid speculation of Kamala Harris joining Bitcoin Conference with Donald Trump

Bitcoin price volatility expected amid speculation of Kamala Harris joining Bitcoin Conference with Donald Trump

Bitcoin price struggles around $66,000 on Wednesday. US spot Bitcoin ETFs experienced minor outflows on Tuesday, coinciding with the continued movement of Mt. Gox funds for repayment, which could exert downward pressure on Bitcoin's price.

Read more

July PMIs point to a very sluggish Eurozone recovery

July PMIs point to a very sluggish Eurozone recovery

This is another report that will not please the ECB. The July PMIs show that the eurozone economy is losing further momentum, as both the manufacturing and services sectors see activity slowing.

Read more

Forex MAJORS

Cryptocurrencies

Signatures