Euro reacts to new German chancellor

Story link: Euro reacts to new German chancellor

Currency trading was slow on Monday as holidays in the US, Canada, and Japan kept the forex markets relatively quiet. The market is expecting the release of several reports this week that will further clarify the effect of Hurricanes Katrina and Rita on the US economy. Currency traders are also anticipating the Federal Reserve meeting where the decision will be taken on whether or not US interest rates will go up again.

In Europe, traders reacted with little enthusiasm to the news that Angela Merkel will be the new German chancellor. The markets are concerned that reforms will be slowed by the new coalition government. Declines in the value of the euro came even though new data showed strong export figures from Germany and despite industrial production figures from France which were better than had been predicted.

The euro dropped 0.5 percent to $1.2052 in relation to the US dollar, lost 0.1 percent to ¥137.70 versus the yen, sat at SFr1.5500 against the Swiss franc, and stood unchanged versus sterling, at £0.6877.

The Canadian dollar was unchanged at C$1.1736 versus the US dollar but lost 0.5 percent to C$1.4141 in relation to the euro.

Sterling, meanwhile, dropped 0.5 percent to $1.7519 versus the US dollar but gained 0.2 percent to SFr2.2532 against the Swiss franc.

Producer prices in the UK were disappointing, bringing the possibility of more hikes in consumer price inflation, but the fears of more growth declines is hurting sterling.

The Polish zloty gained 0.7 percent to 3.8816 versus the euro after news that another round of voting will be necessary after the weekend’s presidential election in Poland.