2021.09.2710:49:00UTC+00Euro Drops As Social Democrats Defeat Conservatives In Tight German Election

The euro drifted lower against its most major counterparts in the European session on Monday, as the Social Democrats secured a narrow victory in German parliamentary elections held on Sunday, marking an end to Conservative leadership for 16 years under outgoing Chancellor Angela Merkel.

Provisional results showed that Social Democrats got 25.7 percent of the vote, followed by Christian Democrats with a score of 24.1 percent.

Both the conservative bloc and the SPD claimed that they have mandate to form the government.

With the SPD lacking a majority, a coalition government involving the Greens and Free Democrats could be a possible option.

Merkel will take a caretaker role until the formation of a coalition government that is likely to drag for months.

Data from the European Central Bank showed that Eurozone money supply growth accelerated in August, while credit to the private sector slowed further.

The broad money supply M3 grew 7.9 percent year-on-year in August, following July's 7.6 percent increase. M3 was forecast to advance 7.8 percent.

The euro showed mixed trading against its major peers in the Asian session, by falling against the franc and rising against the yen and the pound. Versus the greenback, it was steady.

The euro fell to a 1-week low of 0.8528 against the pound, after a 4-day rise to 0.8579 at 5 pm ET. The euro-pound pair had finished last week's trading session at 0.8562. Should the euro falls further, it is likely to test support around the 0.84 region.

The euro lost 0.3 percent to reach a 4-day low of 1.1684 against the greenback. The pair had closed Friday's deals at 1.1720. The euro is seen finding support around the 1.15 mark.

The European currency pulled back to 129.48 against the yen, after having climbed to nearly a 2-week high of 129.86 at 7 pm ET. The EUR/JPY pair was worth 129.79 when it ended deals on Friday. Next near term support for the euro is likely seen around the 127.5 level.

Final data from the Cabinet Office showed that Japan's leading index decreased in July as initially estimated.

The leading index, which measures the future economic activity, fell to 104.1 in July from 104.6 in June, as initially estimated.

The euro weakened to its lowest level since August 16 against the loonie, at 1.4765. The euro was trading at 1.4819 per loonie at last week's close. Immediate support for the euro is likely seen around the 1.46 area.

The euro reached as low as 1.6079 against the aussie in the Asian session and has held steady since then. The euro-aussie pair was worth 1.6133 at Friday's close.

The single currency eased off from an Asian session's 4-day high of 1.6750 against the kiwi, with the pair worth 1.6669. At last week's trading close, the pair was quoted at 1.6700. Further fall in the currency may challenge support around the 1.62 level.

The euro, however, bounced off to 1.0865 against the franc, following a 4-day drop to 1.0819 at 5 pm ET. At Friday's close, the pair was valued at 1.0832. The euro is likely to test resistance around the 1.10 region, if it rises again.

Looking ahead, U.S. durable goods orders for August will be featured in the New York session.