Euro Scales 3-Year Dollar Pinnacle on German Deal Hopes
The European single currency surged Friday to a three-year peak against the dollar as German Chancellor Angela Merkel moved closer to a new coalition government, dealers said.
The euro jumped to $1.2156, its highest level since December 2014, on news that Merkel's conservatives have reached a "breakthrough" deal with Germany's second biggest party, the Social Democrats, toward building a new coalition.
Elsewhere, oil prices receded after Brent crude topped $70 per barrel on Thursday for the first time in more than three years.
In Germany, meanwhile, party chiefs and their teams reached a deal in principle to start formal coalition talks that could lead in the coming months to a new government for the biggest EU economy, negotiators told AFP.
In the all-night negotiations in Berlin, Merkel and her Christian Democrats, Horst Seehofer of her Bavarian allies the CSU and Social Democrats (SPD) chief Martin Schulz hammered out a 28-page paper that will form the basis for the talks ahead.
The euro "jumped to its highest level in three years as the improving political sentiment in Germany and the upbeat comments from the ECB yesterday are fuelling the rally," said market analyst David Madden at CMC Markets UK.
The prospect of Merkel at the reins was reassuring to traders.
"Merkel is one of the biggest proponents of the eurozone project, and her ability to remain in power will be key to ensuring stability as we go forward," said IG analyst Joshua Mahony.
- GKN takes off -
Europe's major stock markets also rose on Friday, boosted also by news of a £7.0-billion takeover bid for British engineering giant GKN, which makes wing tips for Airbus jets.
GKN said it has rejected an "unsolicited" takeover bid from turnaround specialist Melrose worth 7.9 billion euros or $9.5 billion, calling it opportunistic and undervalues the company.
GKN's share price soared more than 26 percent, topping the FTSE 100 risers' board.
- Facebook tumbles -
Wall Street's stocks pushed to new records on Friday, with the Dow climbing 0.8 percent in late morning trade to close in on 25,800 points.
However shares in Facebook fell 5.4 percent in initial trading after the firm announced an overhaul of its news feed which will favor friends and family above other content. Its shares were down 1.1 percent nearing midday.
In Asia on Friday, most stock markets resumed their positive start to the year with Hong Kong extending its record run to 14 days.
Confidence across world markets is booming on the back of a healthy economic outlook and optimism about corporate profits heading into the latest earnings season.
Hong Kong surged 0.9 percent, supported by flows of cash from mainland Chinese investors attracted by cheaper valuations than at home.
- ECB boost, plucky pound -
The euro had already been boosted Thursday after minutes from the European Central Bank's December board meeting showed members were considering altering their guidance on policy in light of the eurozone's improving economy.
That suggests policymakers are leaning towards winding down their own crisis-era stimulus program, putting it on course to synchronize with the U.S. Federal Reserve, which is already in the process of raising interest rates.
Meanwhile, the pound rose to its highest level since Britain voted to leave the EU in June 2016 on hopes for a so-called soft Brexit.
"The pound has rallied strongly following reports that the Spanish and Dutch finance ministers have agreed to push for a 'soft' Brexit," said David Cheetham, chief market analyst at forex trader xtb.
- Key figures around 1630 GMT -
London - FTSE 100: UP 0.2 percent at 7,778.64 points (close)
Frankfurt - DAX 30: UP 0.3 percent at 13,245.03 (close)
Paris - CAC 40: UP 0.5 percent at 5,517.06 (close)
EURO STOXX 50: UP 0.4 percent at 3,607.98
New York - DOW: UP 0.8 percent at 25,766.63
Tokyo - Nikkei 225: DOWN 0.2 percent at 23,653.82 (close)
Hong Kong - Hang Seng: UP 0.9 percent at 31,412.54 (close)
Shanghai - Composite: UP 0.1 percent at 3428.94 (close)
Euro/dollar: UP at $1.2130 from $1.2030 at 2200 GMT Thursday
Pound/dollar: UP at $1.3680 from $1.3537
Dollar/yen: DOWN at 111.25 yen from 111.29 yen
Oil - Brent North Sea: DOWN 33 cents at $68.93 per barrel
Oil - West Texas Intermediate: DOWN 38 cents at $63.42