The single currency tumbled at market opening on Monday amid rising political tensions in Germany. The euro fell 0.60% against the US dollar and slid as low as 1.1722 after the Free Democratic Party (FDP) walked away the negotiating table, which would force Angela Merkel to form a minority government. The other solution would be to hold a fresh round of elections.
However, the sell-off was short-lived, which suggests that investors are not worried about potential negative impacts on Germany’s economic outlook. EUR/USD bounced back above 1.18. Indeed, there is little chance the political jitters disrupts the pace of business in the country.