Euro Hits One-Month High as German Election Eases Market Fears

The euro climbed 0.5% to a one-month high of $1.0528 after Germany’s election delivered a mainstream CDU/CSU victory, boosting DAX futures by 1.4%. Investors remain cautious as Friedrich Merz must still form a coalition, while markets eye the German Ifo survey for further sentiment insights. In the US inflation expectations surged to their highest level since 1995, putting pressure on the Fed ahead of key speeches and Friday’s PCE inflation report.

Equities

The FTSE 100 ended flat on Friday, down just 0.04%, marking its fourth consecutive session in the red. A higher-than-expected rise in UK inflation, mixed corporate earnings, and ongoing concerns about US tariffs left investors cautious.

The pound touched a two-month high earlier in the session after data showed a sharp rise in retail sales for January, before slipping 0.2% to $1.2638. Meanwhile, a survey indicated UK businesses are cutting staff at the fastest pace in over four years ahead of a tax increase set by Chancellor Rachel Reeves, which has already pushed suppliers to raise prices.

Standard Chartered rose 3.8% to reach its highest level in nearly a decade after the bank reported an 18% rise in annual profit and announced a $1.5 billion share buyback programme. The FTSE 350 precious metals and mining index fell 2.9% as gold prices pulled back from recent highs. The FTSE 250, which also ended flat, hovered near a two-week low.

In the US, stocks fell sharply, extending their recent declines, with the Dow Jones and S&P 500 both down about 1.7% and the Nasdaq dropping more than 2%. The S&P 500 recorded its biggest one-day fall since December, while the Russell 2000 also saw significant losses. Megacap technology stocks led the declines, with Nvidia down 4.1% ahead of its upcoming earnings report. All of the "Magnificent Seven" tech stocks closed lower.

Tesla and Rivian both fell 4.7% after announcing vehicle recalls. UnitedHealth dropped 7.2% following reports that the Department of Justice is investigating its Medicare billing practices. Payments firm Block saw the largest decline, tumbling 17.7% after missing fourth-quarter profit expectations. Akamai Technologies fell 21.7% after forecasting annual revenue below estimates.

Forex & Commodities

The US dollar fell to its lowest level since mid-December, weighed down by disappointing US economic data. The dollar index dropped to 106.12, while the euro strengthened following the outcome of Germany’s election. Weakness in the US economy was reflected in declining consumer sentiment, which hit a 15-month low, and a slowdown in business activity amid tariff concerns. US Treasury yields also fell, with the 10-year yield down to 4.43%.

Gold hovered near record highs on Monday, supported by a weaker US dollar. Spot gold rose 0.1% to $2,939.91 an ounce, while US gold futures remained steady at $2,953.30. Last week, bullion hit an all-time high of $2,954.69. Investors are now watching Friday’s US inflation report, the Federal Reserve’s preferred gauge, for further signals on interest rates. Silver gained 0.4% to $32.65, and platinum added 0.3% to $972.68, while palladium slipped 0.4% to $965.81.

Oil prices edged lower, extending last week’s losses. Brent crude slipped 1 cent to $74.42 a barrel, while US West Texas Intermediate crude fell 12 cents to $70.28. Both benchmarks dropped over $2 on Friday as Iraq signalled plans to resume oil exports from Kurdistan’s fields, potentially increasing global supply. Meanwhile, discussions between the US and Russia on Ukraine continued, with EU leaders set to meet on 6 March to address additional support for Kyiv and defence spending.