Here's what happens to stocks and currencies after German Federal elections

Germans are heading to the polls on Sunday September 24 for a federal election which will ultimately decide whether the incumbent chancellor, Angela Merkel, has another four years in power.

Polling stations open on Sunday morning and close at 6:00 p.m. local time. Although the first projections of the election outcome will come on Sunday evening, a definitive final election result could take until Tuesday.

German and broader European equities have enjoyed a stellar start to the year but during a bumpy summer stocks retraced many of those gains. Recent weeks have seen their fortunes improve once again but past performance suggests that the upcoming German Federal election scheduled for this Sunday, September 24, could threaten some of the current momentum.

The results are not encouraging with Germany's flagship DAX 30 index - comprising the 30 largest domestic companies trading on the Frankfurt Stock Exchange - posting an average -0.94 percent decline over the two trading sessions following an election. Only on two occasions were returns positive while the most drastic post-vote tumble came in 2002 when the index slid by -3.37 percent.

The picture for the U.K. benchmark FTSE 100 index is much the same with an average -0.85 percent decline France's benchmark CAC 40 -0.91 percent slide and Amsterdam Stock Exchange's AEX index of the Netherlands' 0.25%.

The euro – the currency used by Germany, France, Belgium and the Netherlands, among the 19 countries of the euro zone for which it is the official tender – has delivered a sharp rise against the U.S. dollar of nearly +13 percent so far this year. If history is any guide, however, it could be set to shed some of those gains in the immediate two-day.

This election sees incumbent Angela Merkel standing for her fourth term as Chancellor and considered the favorite to win.This compares to 22 percent of the vote according to the same polls for the party of her closest rivals, the Social Democratic Party (SPD).While Merkel is widely expected to hold her position following the election, what is less clear is the composition of any coalition the government will likely be compelled to organize.

Source: Bloomberg Pro Terminal

Trader Bozhidar Arabadzhiev

Read more:

• And for all the bounty hunters: Iran offers $80m for the head of Donald Trump
• US service member and 2 US Defense Dept contractors killed in Kenya attack
• Iranian Quds leader Qasem Soleimani has been killed – how are markets reacting
• A calm end of an otherwise loud 2019
• Old but Gold – Top 5 posts of Varchev Finance