Euro Falls On German Political Worries

The euro came under pressure against its major opponents in early European deals on Tuesday, after a report showed that Berlin's SPD section has voted against the proposal for formal coalition talks to form a grand coalition with Angela Merkel's conservative party.

German news website Spiegel reported that skepticism towards another grand coalition is high within the SPD and the state of Saxony-Anhalt and Berlin's SPD section have voted against the proposal of coalition negotiations with the CDU and CSU.

A special SPD convention is scheduled in Bonn on Sunday, when the delegates should approve for formal talks.

Discarding formal talks would be a setback for Merkel, who had been unable to forge a coalition with the FDP and the Greens.

Final data from Destatis showed that Germany's consumer price inflation accelerated to a five-year high in 2017.

Consumer price inflation climbed to 1.8 percent in 2017 from 0.5 percent a year ago. This was the highest rate since 2012.

The euro dropped to 1.2202 against the greenback, 1.1787 against the franc and 135.07 against the yen, from its early highs of 1.2283 and 1.1828 and an 8-day high of 136.10, respectively. The euro is seen finding support around 1.19 against the greenback, 1.16 against the franc and 134.00 against the yen.

The euro slipped to a 4-day low of 0.8864 against the pound, after having advanced to 0.8901 at 1:30 am ET. On the downside, 0.87 is likely seen as the next support for the euro.

The euro pared gains to 1.5180 against the loonie, 1.6776 against the kiwi and 1.5354 against the aussie, from its previous highs of 1.5257, 1.6855 and 1.5417, respectively. If the euro weakens further, it may find support around 1.52 against the aussie, 1.66 against the kiwi and 1.50 against the loonie.

Looking ahead, at 8:30 am ET, the New York Fed's empire manufacturing survey for January will be out.

The Swiss National Bank Governing Board Chairman Thomas Jordan delivers a speech titled "How money is created by the central bank and the banking system" at the University of Zurich at 12:00 pm ET.