EUR/USD opened higher in Asia, buoyed by results from the German elections, though gains levelled off above 1.0520. The CDU/CSU secured 28.7% of the vote, while the far-right AfD received 19.8%, leading to coalition discussions focused on fiscal reforms.
Despite ongoing political uncertainties, the euro initially outperformed other currencies, supported by a broader weakness of the USD. The Swiss franc rose to a two-month high, while the Australian dollar, New Zealand dollar, British pound, and Canadian dollar all gained, alongside the Swedish crown and Singapore dollar reaching multi-month highs.
Additionally, the Korean won and offshore yuan showed strength, with USD/JPY dipping below 149.00 before stabilising. Oil prices remained subdued, influenced by the resumption of exports from Kurdistan, while US equity futures indicated a positive sentiment in the market.
Recent movements in foreign exchange markets suggest traders are responding decisively to shifting political and economic developments. With results from Germany triggering early momentum in the euro, the broader trend remains dependent on how coalition talks progress. Early gains in the common currency coincided with a weaker US dollar, reflecting shifts in sentiment rather than any particular change in policy expectations. The political negotiations in Berlin, now focused on fiscal policies, could introduce further adjustments in positioning should any unexpected agreements or disagreements emerge.
Against this backdrop, strength in European currencies extended beyond the euro. The Swiss franc’s move to a two-month high reinforces the idea that demand for haven assets remains elevated, even as risk appetite improves elsewhere. The broader appreciation in the Australian dollar, New Zealand dollar, and Canadian dollar suggests confidence in commodity-linked currencies, potentially linked to stabilising energy prices. Meanwhile, further gains in the British pound mirror the wider trend of USD softness rather than domestic factors.
In Asia, sentiment leaned towards risk-positive moves as the Korean won and offshore yuan held firm. The dip in USD/JPY below 149.00 was met with support, preventing further losses for the pair. Yen stability will likely remain a focus, particularly if adjustments in global bond yields introduce further fluctuations. For now, markets appear balanced, absorbing economic and political updates without showing clear risk aversion.
At the same time, oil prices struggled to find direction after Kurdish exports resumed, which added supply back into the market. With crude lacking clear momentum, price-sensitive assets may continue to trade in line with broader market sentiment rather than immediate supply concerns. Meanwhile, early indications from US equity futures pointed towards optimism, underlining a willingness among traders to embrace risk assets, at least in the near term.
