Meanwhile on the economic front the flash PMI data from Eurozone proved mixed. Although the composit

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Market Drivers for September 23th, 2013 Merkel wins – but fails to get absolute majority forcing bead tool coalition negotiations EZ PMI show Manufacturing retreat while Services continue to expand Nikkei closed Europe -0.21% Oil $104/bbl Gold $1328/oz.
It bead tool been a quiet and cautious opening of trade in the currency market with Japan out on holiday and economic calendar relatively empty. The biggest story of the night was the re-election of German Chancellor Angela Merkel who managed to win her third term but failed bead tool to nail down an absolute ruling majority. With ballot still being counted its appears bead tool that Ms. Merkel s CDU party will be just 5 seats short of the majority as their junior partner bead tool the FDP failed to breach the 5% threshold and will now not make in into the parliament.
Although Ms. Merkel popularity is uncontested bead tool as the CDU gained its largest share of seats in the Bundestag since 1990, the inability to form a working government right away may create bead tool a pall over the German elections as she will now be forced bead tool to seek a coalition government. The most likely candidate is the opposition SPD party headed by Peer Steinbruck. The CDU and SPD ruled in an uneasy alliance from 2005-2009 but there may be strong resistance within the SPD to another power sharing arrangement bead tool on fears that the CDU would subsume the SPD agenda and reduce the party s appeal even further.
Another possibility is a CDU coalition with the Greens which would be much more narrow in scope – but here again there may be reluctance on the part of the Greens who have already seen their popularity erode and may be fearful of the fate the CDU s former junior coalition partner the FDP which saw its power base evaporate.
In either case, the uncertainty surrounding the coalition rule in Germany is likely bead tool to weigh a bit on the EUR/USD especially if talks drag on. The conventional view is that the CDU and SPD will ultimately agree to a power sharing arrangement with SPD getting the finance portfolio. Such a coalition rule would be the most stable for German politics as it would provide Ms. Merkel with ample majority in parliament to conduct her agenda.
Meanwhile on the economic front the flash PMI data from Eurozone proved mixed. Although the composite reading hit a 27 month high the underlying data showed a weakness in the manufacturing sector while services continued to gain ground. Manufacturing actually slipped below the 50 boom/bust level in France printing bead tool at 49.5 and declined to 51.3 in Germany from 51.8 the month prior.
The slowdown in manufacturing suggests that the EZ recovery may be hitting some headwind, especially bead tool as demand from emerging markets and China starts to slow down. That will no doubt trigger even more dovish commentary from Mario Draghi as he testifies in front of the EU parliament later today. Mr. Draghi is no doubt keenly aware of the recent appreciation of the EUR/USD above the 1.3500 ,mark and will most likely try to talk the unit down by stressing the ECB s commitment to keeping rates low for the foreseeable future.
Meanwhile, bead tool in North America the only data point of note is the flash US PMI reading at 1300GMT with markets anticipating an increase bead tool to 54.2 from 53.1 the month prior. If the US data beats the EUR/USD could weaken further and test the 1.3500 support level as the day proceeds.
Eurozone Debt Crisis
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