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May

Political pressures rock Euro and Pound

Published: Wednesday 30 May 2018

  • Pound under fire from Italy’s political problem
  • Trade tariff debate continues
  • US-North Korea summit still on…
​​By Zafer Deniz
 
Not even two years after the Brexit vote, a new crisis is brewing in Europe. Political turmoil in Italy rocked global markets yesterday, sparked by the prospect of an anti-Europe, nationalist party turning an election into a de facto referendum on Italy’s membership of the Euro. Bond yields soared and the single currency fell. German unemployment and inflation data were released this morning – with Germany a key contributor to the Eurozone economy, these results were hotly anticipated. While the Euro had already dropped in advance of these key data results, given the effects of the news from Italy, German unemployment has fallen to record lows for May, so that’s some good news for both the Eurozone and the Euro. German inflation, which was forecast to be up on rising fuel prices, also increased for May, providing a helping hand for the Euro after all the political pressures and helping it push back up a little.
 
Pound under fire from Italy’s political problem
 
The British Pound didn’t escape the selloff caused by the Italian situation, falling to a six-month low against the US Dollar as investors sought the safest assets, an uncertain situation that is bound to boost the US Dollar as a perceived safer currency.
Brexit continues to dominate the news
 
Also in UK news, Anti-Brexit billionaire George Soros has urged the EU to "transform itself into an association that countries like Britain would want to join". Mr Soros said in a speech that Brexit was an "immensely damaging process" for both sides that would "probably" take more than five years to sort out. He warned the EU was "facing an existential crisis" on several fronts. Mr Soros said the “Best for Britain” campaign to halt Brexit would launch its "manifesto" within days.
 
Trade tariff debate continues
 
Over in the United States, policymakers have stated that they plan to impose 25% tariffs on $50bn worth of Chinese imports "shortly" after mid-June. Critics had accused the administration of going soft on China after Treasury Secretary Steven Mnuchin said tariffs were on hold while the two sides continue trade talks. But the White House said on Tuesday that a final list of imports where tariffs are due to be imposed will be published by 15th June. The threat of a trade war is still around and the US Dollar’s rise may slow down if it escalates further.
 
US-North Korea summit still on…
 
The White House says they are prepared for the summit with North Korea to take place on 12th June. President Trump thinks ongoing discussions with North Korea are 'going well' The summit is back on, for now. However, in the US media, a new US intelligence assessment from the CIA has concluded that North Korea has no intention of giving up its nuclear weapons any time soon.
 
Later today, we will see the ADP employment report, along with another revision of Gross Domestic Product (GDP) data from the US. With everything else going on with the US Dollar right now, it will be interesting to see if today’s data results have any effect on the US currency.
Car Jokes

How much does a Mustang cost?
More than you can af-Ford.

When is a car not a car?
When it turns into a street.

Where do Volkswagens go when they get old?
The old Volks home.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
USD 13:15 US: Non-Farm Employment Change 204k 191k
CAD 13:30 Canada: Current Account -16.3b -18.1b
CAD 13:30 Canada: Raw Materials Price Index 2.1% 2.1%
USD 13:30 US: Preliminary Gross Domestic Product 2.3% 2.3%
USD 13:30 US: Goods Trade Balance -68.3b -71.2b
CAD 15:00 Bank of Canada Overnight Rate 1.25% 1.25%
CAD 15:00 Bank of Canada Rate Statement    
USD 19:00 US: Beige Book    

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