Investors Watch Central Banks Closely as Political Drama Unfolds Globally

Image Credit: Reuters

Political instability is shaking governments from South Korea to Germany to Canada, but investors remain calm, with European markets set for a quiet opening, awaiting guidance from upcoming central bank meetings. 

On Tuesday, all eyes will be on German assets after the German parliament accepted Chancellor Olaf Scholz's proposal to withdraw confidence in his government, clearing the way for early elections in February. 

The euro briefly rose after the no-confidence vote but remained largely unchanged in Asian hours, trading at $1.051, near the two-year low of $1.03315 from last month. The euro has fallen nearly 5% this year.

While Germany's government faces turmoil, its stock market has surged, up 21% this year, outpacing the pan-European STOXX 600 index, which has risen 7%. SAP's soaring share prices have been a major driver of this growth.

Futures suggest a lower open for the DAX index as surveys due this week could offer insights into the struggling economy. Data on Monday showed that Germany’s economic decline slowed slightly in December, but business activity still contracted for the sixth consecutive month. UK labor data will also draw attention, with the Bank of England expected to hold rates steady later this week.

Central banks in the U.S., Japan, Sweden, Norway, Indonesia, and Thailand will also hold meetings this week, with the Bank of Japan, Norges Bank, and Bank of Thailand expected to maintain their current policies, while the Riksbank is expected to cut rates.

The U.S. Federal Reserve will be the main focus, with traders looking for signals on the future path of interest rates after the anticipated 25 basis-point cut this week.

With so many major policy decisions on the horizon, investors have been cautious, and market movements have been subdued. While they keep an eye on global political developments, from the impeachment of South Korea’s President Yoon Suk Yeol to the resignation of Canada’s Finance Minister Chrystia Freeland, they are likely to remain on the sidelines for now.

 

 

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.