Morning Brief – Monday 5th

EUR-avin’ a laugh.

 

The Commission sits today to discuss the future of the Italian budget. The Euro found support on Friday and throughout the weekend whilst EU Commission President Juncker proclaimed that there was no risk of Italy leaving the Euro. Labelling the secessionist forces that threaten to drag Italy away from Eurozone membership as suicidal, Draghi allayed some investors’ fear surrounding European macro-political risk. The Euro also received a boost alongside the Pound Sterling as weekend rumours of a private Brexit deal within number 10 began to gather pace. Despite positive news on a post-Brexit trading relationship and a diminution of intra-Union risk, the Euro failed to make ground through 0.8800 within EURGBP and failed to sustain momentum above 1.14 against the Dollar. The Pound received a bid at market open having gained considerable momentum in the preceding Asian session. With the UK cabinet meeting tomorrow, Brexit remains at centre stage with an impromptu November summit many investors’ first-case scenario. With domestic political uncertainty and leadership challenges still on the cards, agreement on the European stage does not presuppose a future relationship. The race for the Senate and House is on with US mid-term elections taking place on Wednesday. Former President Obama took to the campaign trail against incumbent President Trump with polls suggesting the race is too close to call. Success for the Democrats at the mid-term elections will limit the efficacy of the Republican controlled White House and government to progress with political decision making. It is likely, therefore, that the Dollar would face a considerable headwind if Democratic support comes out stronger than expected. Emerging market currencies continued to consolidate today with the Turkish Lira and the South African Rand both gaining considerable value. Later this month, the South African Reserve bank will meet to produce a much-awaited monetary policy decision.

 

 

Discussion and Analysis by Charles Porter

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