FxWirePro: Euro likely to decline towards 1.14 as bad news pile up

The single currency is currently trading at 1.175 against the dollar and we at FxWirePro expects further decline towards 1.14 as bad news for the Eurozone continue to pile up. After euro was managed to keep its head after FOMC meeting last month, it was hit hard by German Chancellor Angela Merkel’s poor performance in the Federal election, where she was elected for the fourth time to become Germany’s longest-serving chancellor with her worst performance ever. She received 32.9 percent of the votes, down from 41.5 percent in the last election and won 246 seats, down 65 seats from the previous election. In addition to that, German right-wing AfD Party became the third biggest party with 12.6 percent of the votes. They will enter the Bundestag parliament for the first time with 94 seats. As she struggles to form a working coalition government, this weekend Spain’s Catalonia region voted in favour of independence despite police violence and riot police taking down voting booths and throwing people, which indicates that trouble in the region would continue in foreseeable future.  

So far, the only force that keeping the euro supported is the speculations over upcoming monetary policy from the European Central Bank (ECB), which is expected to announce a further tapering of its asset purchase program.  There is a high chance that this speculative force would fail to garner support for the single currency as ECB is more likely to be dovish than the market is currently anticipating.