Euro news and analysis:

- The Euro has been hit hard Thursday by the prospect of Eurozone interest rates remaining low for another year or more.

- Now political concerns have emerged that could compound its problems as a split emerges within German Chancellor Angela Merkel’s conservative bloc.

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German ruling coalition split

A split in German Chancellor Angela Merkel’s conservative bloc looks likely to add to the Euro’s woes. It was sent reeling Thursday by a European Central Bank decision to maintain Eurozone interest rates at their current low levels “at least through the summer of 2019”, outweighing a reduction in its asset-purchase program to zero by the end of this year.

However, while all eyes were on the ECB, news has emerged that Bavaria’s Christian Social Union (CSU), a long-time partner of Merkel’s Christian Democratic Union (CDU), is in dispute with the Chancellor over migration.

Challenge to Merkel’s authority

According to Deutsche Welle, Germany’s international public broadcaster, the country’s conservative bloc may be coming apart at the seams as its Bavarian wing lines up behind Interior Minister Horst Seehofer and against the Chancellor over migration. Its the greatest challenge ever to Merkel’s authority,” the broadcaster said.

It described the two as “on a collision course”, while the Augsburger Allgemeine newspaper quoted an unnamed senior CSU lawmaker as saying the Bavarian party was considering leaving the parliamentary bloc – a move that would bring down the two parties’ coalition government with the Social Democratic Party (SPD) formed just three months ago after lengthy negotiations following Federal elections that ended in stalemate.

While the CDU and the CSU could yet resolve their differences, a split would undermine the Euro even further, compounding its current weakness.

EURUSD Price Chart, 15-Minute Timeframe (June 2018)

Latest EURUSD price chart.

Chart by IG

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex