Euro hits 6-month high after Germany’s Merkel said it was ‘too weak’
The euro surged to a more than six-month high on Monday after German Chancellor Angela Merkel said it was “too weak,” while oil prices were bolstered by expectations that top exporters will extend supply curbs this week.
A one-month high for oil futures LCOc1 on hopes of a supply cut by the Organization of the Petroleum Exporting Countries helped Asian shares to their best session in weeks.
U.S. crude CLcv1 rose 0.61 percent to $50.98 per barrel and Brent LCOcv1 was at $53.80, up 0.35 percent on the day.
European shares struggled to maintain momentum, but the U.S. stock market gained, lifted by defense and tech stocks, after U.S. President Donald Trump announced arms deals of up to $350 billion with Saudi Arabia over the weekend. [.N]
The Dow Jones Industrial Average .DJI rose 68.11 points, or 0.33 percent, to 20,872.95, the S&P 500 .SPX gained 8.04 points, or 0.34 percent, to 2,389.77 and the Nasdaq Composite .IXIC added 33.64 points, or 0.55 percent, to 6,117.35.
The pan-European FTSEurofirst 300 index .FTEU3 lost 0.09 percent and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.43 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 1.05 percent higher, while Japan’s Nikkei .N225 rose 0.45 percent.
Currency markets flipped 180 degrees as Merkel, during a trip to a Berlin school, made a surprise reference to the euro being weak because of the European Central Bank’s ultra-low interest rates and money printing program.
Until that point, the single currency EUR= had been in the red, but the comments saw it swiftly climb to a six-month high $1.1250 and bring the morning’s rebound in the dollar to an abrupt halt. The euro was last up 0.22 percent at $1.1229.
“The thing with euro/dollar is that you have quite a positive mood on the euro at the moment,” said ABN Amro FX strategist Georgette Boele. “And when Merkel makes comments that the euro is probably too low then this is taken as another positive reason to push it higher.”
Sterling GBP= was also in the firing line, last trading at $1.3002, down 0.25 percent on the day, as polls showed the country’s election race tightening. Britain’s chief Brexit negotiator again threatened to walk away from EU exit talks unless the bloc eased its demands.
“Last week was all about U.S. uncertainty but we have had a reminder that Europe still has plenty of uncertainty too,” said Alvin Tan at Societe Generale.
