#ThrowbackThursday:
Look around. The Federal Reserve has tightened policy considerably, the European Central Bank’s first anticipated interest rate hike in seven years is pencilled in for next year. Add to that the removal of the stimulus provided by numerous quantitative easing programs and it’s unsurprising that the waters are beginning to turn choppy. Put simply, the unfaltering and unwavering liquidity provisions that have been made available by public institutions have turned/are beginning to turn off the taps. With immense cash flows in the bond markets each day it is unsurprising therefore that the world’s major currencies are encountering uncharacteristic liquidity as public demand is being replaced by private purchase. Add to that canvas a Brexit, Italy’s populist government and prospective spending plan, German political instability, and Trump’s unique style of leadership, and intraday volatility less than 0.5% within GBPUSD, EURGBP and EURUSD seems like a miracle. Today, the UK cabinet was presented with the 95% completed plan for Brexit. Reflecting this risk and rumours surrounding this event, the Pound drifted lower throughout the day’s session. Given the progress on Brexit, markets are coming to expect an even more meaningful cabinet meeting next week and an impending European summit to discuss the results. The European Union this morning gave its impression of the Italian economy. The numeric impression was concerning with improving expectations for economic growth next year were overwhelmed by a budget deficit that was forecast to grow from 1.7% of GDP next year to 2.9% of GDP; a level well outside the EU’s two-decade long permissible levels. This was nothing markets didn’t know already with the EU having labelled Italy’s spending plan unacceptable for two weeks now. However, the reminder of European risk was sufficient to push the Euro back down to 1.14 against the Dollar and 0.70 within EURGBP.
Discussion and Analysis by Charles Porter
Japanese Yen With JPY at a new 34 year low versus EUR, the market is set for an ambush by the Bank of Japan if it acts today at the end of their Policy Meeting to support the Yen. The reason that the market is susceptible is because it has convinced itself that the BoJ […]
Too soon to call USD lower Those following the US Dollar’s performance in the markets would have noted a recent downturn accelerating as this week has progressed. There have been two factors driving this sell-off but it is far from certain that either may endure long enough to push the Dollar index back to its […]
Milan, Italy The City of Milan has a late night noise problem and so it has acted unilaterally to resolve it-Italian style. A ban on the sale of take away food including ice cream and pizza after midnight is being imposed to protect the “peace and health of residents.” Here in the UK late night […]