The euro has been getting slammed of late and is once again standing out as a clear underperformer on this Monday.
There are two drivers behind the weakness worth highlighting.
The first is the uncertain political climate in Germany. The German Chancellor has said he’d be open to moving up a parliamentary confidence vote by several weeks to before Christmas, potentially speeding up an early federal election.
The second driver is the fear around the Trump presidency and the impact tariffs will have on the single currency. The FT reported that Robert Lighthizer could once again be appointed as the U.S. Trade Representative. Lighthizer is viewed as a staunch protectionist, which could translate to aggressive tariffs on imports into the U.S.
As for the rest of the currency market, the dollar has been mostly bid, though some of the risk-correlated FX markets have been finding some offsetting demand as U.S. equities continue to push record highs. For the remainder of the day, all will be quiet on the calendar front with the U.S. bond market closed in observance of Veterans Day.
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