EUR: political events take centre stage on an otherwise-quiet day

The euro suffered some losses against the pound and dollar yesterday, following reports that German coalition talks had collapsed. Chancellor Merkel could yet be embroiled in a fresh round of elections and, if that happens, there is no guarantee that the Christian Democratic Union party would fare any better than last time.

There is also some talk that Merkel could be forced to step down as Chancellor which will not imbue the markets with any confidence in the euro – at least until the situation is a little clearer.

Today is another quiet day for eurozone economic data, but it is reasonable to expect that the focus on the German coalition talks and Merkel’s position will dominate the headlines again.