The German federal election, which is scheduled to take place on September 26, 2021, is already causing ripples in the financial markets. The election is expected to have a significant impact on the forex market, both in the short and long term. The outcome of the election will determine the direction of the country’s economic and political policies, which will have a direct impact on the forex market.
Germany is the largest economy in the European Union and is considered a major player in the global forex market. The country’s economic policies and political stability have a significant impact on the forex market. Therefore, any change in the political landscape of Germany is likely to have an impact on the forex market.
One of the key factors that will determine the impact of the election on the forex market is the winning party’s economic policies. The two main parties in the election are the Christian Democratic Union (CDU) and the Social Democratic Party (SPD). The CDU is generally viewed as a pro-business party, while the SPD is more focused on social welfare policies. Therefore, the winning party’s economic policies will determine the direction of the forex market.
If the CDU wins the election, it is likely that the party will continue to pursue pro-business policies, which could lead to a stronger euro. The CDU’s policies are likely to focus on promoting economic growth, reducing taxes, and increasing investment in infrastructure. These policies could lead to increased foreign investment in Germany, which could lead to a stronger euro.
On the other hand, if the SPD wins the election, the party is likely to focus on social welfare policies, which could lead to a weaker euro. The SPD’s policies are likely to focus on increasing social spending, investing in education and healthcare, and increasing taxes on the wealthy. These policies could lead to a higher deficit, which could lead to a weaker euro.
Another factor that could impact the forex market is the stability of the German government. If the election results in a coalition government, it could lead to political instability, which could lead to a weaker euro. A weaker euro could lead to increased demand for other currencies, such as the US dollar or the Japanese yen.
Furthermore, the outcome of the German federal election could impact the European Central Bank’s (ECB) monetary policy. The ECB is responsible for setting monetary policy for the Eurozone, and any change in the political landscape of Germany could impact the ECB’s decision-making process. If the winning party’s economic policies align with those of the ECB, it could lead to a more stable euro. However, if the winning party’s economic policies diverge from those of the ECB, it could lead to increased volatility in the forex market.
In conclusion, the German federal election is likely to have a significant impact on the forex market. The winning party’s economic policies, the stability of the German government, and the impact on the ECB’s monetary policy are all factors that could impact the forex market. Therefore, forex traders should closely monitor the election results and adjust their trading strategies accordingly.
