FX.co ★ German Chancellor prompts euro to rise

Some policymakers have a knack of influencing the exchange rate of national currency. The effect is even more profound if it is a country leader who makes verbal intervention.

Recently, Germany’s Chancellor Angela Merkel complained about the weak single currency while commenting upon the ECB monetary policy. She said that a low exchange rate of the euro makes German exports cheaper. On the back of these comments, the euro skyrocketed reaching the 6-month high. Ms Merkel also touched upon the oil market conditions. She said that low oil prices reduce the cost of imports to Germany denting the trade surplus. “If oil were 50% more expensive, than we’d soon have a lot more imports,” the German Chancellor noted. However, her comments had much less impact on oil prices than on the euro exchange rate.

At the same time, the US President unknowingly supports the single European currency as well. A great deal of uncertainty over Trump’s political decisions puts the greenback under pressure. Bearing in mind that the political turmoil in the United States is unlikely to fade away anytime soon, the greenback has little chances to gain ground.