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Sterling edges higher as markets consider Italian election impact on Euro

Published: Tuesday 06 March 2018

  • Reserve Bank of Australia puts interest rates on hold, maybe for quite some time
  • Trump’s horse trading damages Canadian Dollar
​​By David Johnson

Markets start to calm after Trump’s trade storm
As the markets have started to see the US President’s calls for import tariffs as more of a bargaining chip during the North American Free Trade Agreement (NAFTA) discussions than a real policy option, the US Dollar has relaxed a little. Some funds that had flowed into the safe haven of the Japanese Yen are seeping back out again. 
Trump’s rhetoric has knocked the Canadian Dollar, though. The GBPCAD exchange rate has risen three cents since the start of March, as traders worry about how any new NAFTA deal will affect Canada. After all, 70% or more of Canada’s exports go to America. This afternoon’s Ivey Purchasing Managers’ Index (PMI) might offer some clues as to Canadian business sentiment.
Australia has no intention of raising interest rates any time soon
Overnight, the Reserve Bank of Australia (RBA) left their base rate at the record low of 1.5% and the tone of their statements suggested that they saw no reason for any kind of interest rate hike in the medium term. The Australian Dollar had gained a little ground ahead of their announcement, but it fell back afterwards. That move was a cent down and half a cent up in the GBPAUD exchange rate.
Some of that rise was also driven by the Pound…
Pound pushes back up as markets consider Italian election impact on Euro
Sterling fell late last week, but has mounted a recovery of sorts. Its rise against the Euro is partly driven by Euro weakness as the impact of Italy’s odd election result is mulled over. One thing that cannot be missed in the rhetoric coming from the various parties in Italy is the anti-EU mood. With more than half of Italian voters backing the anti-establishment parties, the full impact of the Italian election is probably not yet priced into the value of the Euro.
Watch out for US Dollar movement this afternoon…
We have a quiet morning ahead of us, with barely a data release to keep things lively, but the afternoon is likely to be volatile. US Factory Orders data and Durable Goods Orders are expected to be rather downbeat, so US Dollar weakness could ensue, dependent on what is said by two Federal Reserve speakers later.
Water joke!
And as one whose home has been without running water since 07.30 am on Saturday, I have just seen the compensation offer from South East Water. I am quite pragmatic about these things; pipes burst and some poor soul has to go out in the freezing cold and fix it. I am less pragmatic about the utterly laughable communication from the water company. That has been appalling. They are lucky they have a local monopoly.
After the announcement

After his daughter just announced her engagement, her father takes her to one side. "This chap you want to marry,” he says, “I don’t really know him. Does he have any money?"

"Oh Daddy, you men are all alike," she laughed, "That's exactly what he asked me about you."

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Retail Purchasing Managers' Index 50.8 50.8
CAD 15:00 Canada: Ivey Purchasing Managers' Index 55.2 56.3
USD 15:00 US: Factory Orders 1.7% -0.4%

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news