Sorry, come again?
Trouble throughout the Eurozone, the United States and the UK makes for interesting trading within the world’s most popularly traded currency pairs. Marked by a spike in the VIX, a volatility index traded on the Chicago Board of Options Exchange, which currently carries a 19 handle, price movements across the board have become more exaggerated, sudden and severe.
Continued trouble in Italy has pushed yields on a generic 10 year government bond above 3.50 (3.78 at the time of writing); a price that we have not seen associated with Italian debt for the past four years since the climax of the European Sovereign Debt Crisis. Following the European Council’s summit, Italy’s budget proposal remains in the foreground of investors’ minds. Following verbal admonitions from the EU budget Commissioner and even the European Central Bank president himself, the populist coalition government made up of domestic ‘league’ and ‘five star movement’ parties looks to be in trouble.
With a lack of momentum behind Brexit both abroad and at home following the Brussels summit, investors are left to only price in yet another delay in a final deal and a short and unconfirmed extension of the transition period. Given the rapidly approaching March 29th 2019 deadline, it is apparent that traders have looked upon the Pound with relatively sanguine eyes in the face of yet another set back. In cable, 1.3250 attracted considerable resistance and selling pressure has been unable to shift GBPEUR, still carving a narrow channel, banked by 1.10 and 1.16.
In the United States, the Federal Reserve Bank is under attack but surviving well. Taking scathing criticism from the White House and even its own constituent bankers, the question continues to echo, ‘how long can we tighten rates for?’. The Reserve, in its latest September minutes, removed all reference to incumbent rate policy as ‘accommodative’. There was little fallout from the exclusion within markets given the elevated rates that the US economy presently awards investors and the tenuous link to future policy given the retrospective nature of the change. The Dollar remained bid following the release of minutes with market participants unable to warrant shedding US Dollar based assets given the unparalleled reward the greenback holds.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – UK Growth
Humphrey Percy
Mon 15 Sep 2025
UK Growth Normally when UK Government figures come in exactly in line with forecasts it is a matter for self congratulation among economists and last week’s July Growth figures were no exception: the expectation was for Zero growth and indeed growth for the UK economy in July was Zero. There is a snag here: apart […]
Daily Brief – British Pound
Humphrey Percy
Wed 17 Sep 2025
British Pound Despite the efforts of the press to write the story that UK PM SirKeir is on his last legs, Sterling on a 2 month high is unruffled so is not taking that story seriously. Damning with the headline “Lack of Replacement Options Keeps Starmer Safe-For Now” was Bloomberg yesterday which is not exactly […]
Daily Brief – US Rate Cuts
Humphrey Percy
Fri 5 Sep 2025
US Rate Cuts The markets are understandably fixated on the US jobs report which comes out this afternoon given the Federal Reserve’s laser like focus on employment. On Wednesday data reflected that July Job Vacancies fell to a 10 month low. There is now a 100% chance priced in for a September US rate cut and […]
