 Euro is facing immense selling pressure today as US session commences, driven by both external trade concerns and internal political challenges in Germany. The market is wary of escalation in trade tensions with the US following Donald Trump’s election victory, with reports suggesting that Robert Lighthizer—a trade hawk known for his aggressive stance—could make a return as the US Trade Representative. Such a move signals a push for increased tariffs, raising fears of a "second round" of the trade war, which could place substantial pressure on Europe’s already sluggish economy. Compounding these external risks, Germany is facing its own internal political crisis. Chancellor Olaf Scholz has indicated willingness to move up national elections after the collapse of his ruling coalition last week. This came following his dismissal of former Finance Minister Christian Lindner, triggering turmoil within the government. The prospect of a snap election adds a layer of uncertainty for Euro, as markets turn anxious about Germany’s future fiscal direction, given its role as the economic engine of the Eurozone. Despite the euro's struggles, Yen remains the weakest currency today. Prime Minister Shigeru Ishiba managed to retain his position in a parliamentary vote but received only 221 votes, well below the required majority in the 465-seat legislature. Ishiba’s position is now precarious, heading a minority government that faces escalating trade threats from the US, along with heightened geopolitical challenges involving China and North Korea. This political instability could hinder BoJ’s ability to execute its planned policy tightening as the central bank deals with heightened uncertainty both at home and abroad. |
