Weekly reviews

European currency recovers amid Germany inner political complications

The new trading week starts amid sales in the Asian equity markets, as well as losses on European exchanges. On Friday, US equity markets closed in the red as US dollar continued to decline, Dow Jones Industrial index fell 0.4 percent, S&P 500 lost 0.3 percent, and Nasdaq dropped by 0.2 percent.

On Monday, with the start of the new week, the market sentiment continued to deteriorate after it became known that the talks on the coalition in Germany ended with no progress. Negotiations between the four German parties seeking to form a coalition government after the elections ended in vain after the pro-business Free Democrats (FDP) left the negotiations, referring to irreconcilable differences. This means that Merkel will either seek to form a minority government with the Greens, or new elections will be held.

European stock markets fell by 0.3-0.5 percent, while the German main index DAX fell by 0.7 percent.

China's equities recovered after falling to session lows as Beijing established new guidelines for regulating asset management products. Analysts feared that this could weaken investors' appetite for more risky assets. The Shanghai Composite Index rose by 0.3 percent.

The US House of Representatives on Thursday passed its version of the tax policy reform bill that would reduce corporate taxes, but the Senate continued to argue over proposed tax bill, and investors are not sure whether Congress will be able to reach a compromise.

The dollar index, which tracks the dollar against a basket of six competitor currencies, added 0.2 percent while the European currency reached Eur 1.1711 at first, but then won back losses and recovered back to 1.18 zone.

Mario Draghi will speak today, but the market will react only if he says something new. The likelihood of this is not very high given the frequency of the ECB's recent speech. The main events of the week will be held on Tuesday and Wednesday, when large blocks of statistics from the US will be published together with a protocol from the last FOMC meeting. The second half of the week will be under the influence of news from the European continent. Looks like the weeks will be interesting and volatile.

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