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Euro fluctuates after German election
The euro seesaws as traders digest Germany’s election outcome and inflation data.
Euro gains, then pares back after German election results.
CDU/CSU secures 28.6% of votes, coalition talks ahead.
Far-right AfD and Left Party hold a blocking minority.
Eurozone inflation confirmed at 2.5% in January, highest since July 2024.
Market reaction
The euro jumped as much as 0.6% before retreating below $1.05 on Monday, reflecting investor uncertainty over Germany’s election results. The center-right CDU/CSU bloc won 28.6% of the vote, in line with expectations, but must form a coalition to secure a parliamentary majority. Friedrich Merz is on track to become chancellor, yet prolonged negotiations loom. The far-right AfD and the Left Party collectively hold a third of the seats, potentially stalling key legislative efforts.
Inflation pressures persist
Eurozone inflation was confirmed at 2.5% in January 2025, its highest level since mid-2024, primarily fueled by surging energy costs. Core inflation, stripping out food and energy, remained steady at 2.7% for a fifth straight month, marking its lowest level since early 2022. Consumer prices fell 0.3% month-over-month, following a 0.4% gain in December.
Economic calendar: Key data to watch
Tuesday: Japan corporate service price index, Germany GDP final, US house price index, consumer confidence.
Wednesday: Australia monthly CPI, Germany Gfk consumer sentiment, US new home sales.
Thursday: New Zealand business confidence, Swiss GDP, ECB meeting accounts, US GDP revision, jobless claims, durable goods orders.
Friday: Japan Tokyo CPI, Germany retail sales & CPI flash, Swiss retail sales, Canada GDP, US PCE inflation, trade balance.
