Tensions simmer between EU and Italy

October 23, 2018

A quieter day ahead as far as announcements go but there is still plenty going on in the world which can shake markets.

The USD asserted its authority as a ‘safe-haven’ currency, sending USD pairs down overnight. The EUR/USD opened the week at $1.15137 and remained flat in early trading before shooting up to a high of $1.15497 mid-session. Those gains were short-lived however as the pair declined over several hours, hitting a low of $1.14551 late. It is not far off that at the moment, currently trading at $1.14646. The GBP/USD had a torrid time as uncertainty grows over the UK’s Brexit deal. The pair opened at $1.30654 and traded in a tight range early, bumping up to a high of $1.30896 mid-session. The rot set in shortly afterwards, with the pound tumbling to lows of $1.29551 a few hours later. It remained flat in late trading and is not far off that low, currently at $1.29667.

The Dow looked set for a strong showing until a late sell-off wiped out all of the previous gains. The index opened at 25,351.60 and climbed for half of the session, peaking at 25,575.64 before the sell-off began. The Dow fell sharply over the next few hours to hit a low of 25,231.07. It has come off those lows and is currently trading at 25,316.80. The Dax had another disappointing session, closing lower overnight. The German index opened at 11,585.94 and surged to an early high of 11,676.60. It could not hold onto those gains and remained shaky over the next few hours before dropping away to lows of 11,491.10. The Dax came of those lows slightly and closed at 11,531.10.

The day ahead could prove to be a stable one, or something outside data releases could cause some volatility. One such situation is the tension between the EU and Italy. The EU looks set to reject the draft budget plan put together by the new Italian government. This new budget could see the Italian budget deficit increase, something that the EU is does not want to see. However, the ever-growing euro-scepticism of the Italian government puts them at odds with those in Brussels, meaning the EU could try and impose financial penalties on the Mediterranean country.

Data set for release today includes:

Japan – BoJ Core CPI

Europe – German PPI, European Consumer Confidence

Australia – RBA Assistant Governors Guy Debelle and Michele Bullock speak

US – Richmond Manufacturing Index, FOMC Member Raphael Bostic speaks

UK – CBI Industrial Order Expectations, BoE Governor Mark Carney and MPC Member Andy Haldane speak


Disclaimer: The information in this website is of a general nature only and the advice has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on the advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs. We recommend you seek independent advice if necessary.