Euro Higher As German Politicians Reach Deal For Coalition Talks

The euro strengthened against its major counterparts in European deals on Friday, as talks between leaders of Angela Merkel's conservative Christian Democratic Union bloc and the centre-left Social Democrats have reached a "breakthrough" in coalition agreement.

The preliminary deal agreed between Merkel's Christian Democratic Union, its Bavarian sister party the Christian Social Union and the Social Democratic Party opens door for detailed discussions, raising prospectus for ending months of uncertainty since elections in September.

The draft blueprint showed that both sides had agreed to keep the top tax rate unchanged at 42 percent, if they form a new coalition government.

SPD members will vote on the preliminary agreement on January 21, regarding whether formal talks should proceed.

Data from German economy ministry showed that the country's strong economic momentum is likely to have eased somewhat by the end of 2017 but the economy will be robust in 2018.

Large order intake and the positive business expectations signal that the economic trend will continue to be robust in the current year.

The single currency spiked up to more than 3-year highs of 1.1789 against the franc and 1.2137 against the greenback, from its early lows of 1.1735 and 1.2031, respectively. If the euro rises further, 1.20 and 1.23 are likely seen as its next resistance levels against the franc and the greenback, respectively.

The 19-nation currency strengthened to a 1-1/2-month high of 0.8926 against the pound and a 3-day high of 134.80 against the yen, reversing from its early lows of 0.8882 and 133.78, respectively. The next possible resistance for the euro is seen around 0.91 against the pound and 137.00 against the yen.

The European currency advanced to more than a 3-week high of 1.5194 against the loonie, 4-day high of 1.6728 against the kiwi and an 8-day high of 1.5411 against the aussie, off its early lows of 1.5060, 1.6547 and 1.5242, respectively. The euro is seen finding resistance around 1.53 against the loonie, 1.69 against the kiwi and 1.55 against the aussie.

Looking ahead, U.S. consumer prices and retail sales for December, as well as business inventories for November are set for release in the New York session.