Merkel's coalition attempts seen weighing on euro in short term

(Bloomberg) The euro may weaken short-term and peripheral bond yield spreads widen as the rise in popularity of a far-right party in Germany’s election threatens to undermine efforts for closer European integration.

The shared currency declined against all except one of its Group-of-10 peers after the weekend vote saw Alternative for Germany, or AfD, post a surprisingly strong result. That cast a shadow over Chancellor Angela Merkel winning a record-equalling fourth term. While analysts said the drop in the euro and German bund yields may prove short-lived amid a spate of speeches by European Central Bank policy makers this week, Merkel’s coalition talks and political uncertainty in Spain and Italy still pose a risk to the outlook.