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December 2016

EU dodges bullet over Austria

Published: Monday 05 December 2016

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  • EU dodges bullet over Austria
  • Italy rejects more centralised government 

Holding a referendum is looking like a poor political move for Prime Ministers. David Cameron was hoisted by his own petard and Italian PM Renzi is in the same boat after a resounding loss in his referendum on vesting increased power with the Government. This anti-establishment and some consider Anti-EU vote has really splashed the gravy on the EU train. With a 66% turnout, there is no doubting the mistrust of the establishment by the voters in Italy.
 
The immediate impact will be nervousness among investors who were perhaps seeking to invest in Italy. That could well sound the death knell for Monti dei paschi di sienna, the troubled Italian bank that needs €5 billion just to survive. There are rumours that other Italian banks have similar – if perhaps not such severe – problems. Moreover, the relationship between Italy and the EU will be strained in the Five Star political movement in Italy gains further influence.
 
The Sterling–Euro exchange rate spiked to 1.2040 overnight, but has settled back on some profit taking and the Euro–USD rate dipped to the very evident $1.05 support before bouncing a little. Uncertainty still hovers around the Euro like a group of Harry Potter’s dementors. This will be an interesting week for all concerned and it will present opportunities for both buyers and sellers of the Euro.
 
There are plenty of other data releases this week, including service sector indices and a few Gross Domestic Product (GDP) releases, but the news from Europe will dominate.
 
And my good news story for today concerns Joe Bartley. Joe is an 89-year-old ex-servicemen who was widowed two years ago. He placed an ad in a local paper asking for work because he was dying from boredom and lack of contact with others. Cantina Kitchen & Bar in the seaside town of Paignton, Devon has offered Joe a job and he started at the weekend. Bravo, Cantina. I salute you.
 

Dear John

 
A Sailor is aboard a Royal Navy ship in the South China Sea when the mail arrives. There is a letter from his girlfriend. It says, “Dear Mike. I can’t go on like this. You are away so much and I am so lonely. I have met someone else and it’s over for you and me. I know you took a photo of me when you set off for this tour. I would like it back, please.”
 
A week later, the ex-girlfriend gets a letter in a large envelope via BFPO from Mike. It says, “Dear Carla. Thank you for your letter. I am really sorry, but, while I know your name, I am sorry to say I can’t remember what you look like, so I have enclosed a selection of the pictures I carry with me. Can you take the one that is of you and send the rest back, please?”
 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
EUR 09:00 EU: Final Services Purchasing Managers' Index 54.1 54.1
EUR 09:30 EU: Sentix Investor Confidence 13.1 14.7
GBP 09:30 UK: Services Purchasing Managers' Index 54.2 54.5
EUR 10:00 EU: Retail Sales month-on-month -0.2% 0.9%
USD 13:30 Federal Open Market Committee Member Dudley Speaks    
USD 14:45 US: Final Services Purchasing Managers' Index  54.7 54.9
USD 15:00 US: Non-Manufacturing Purchasing Managers' Index  54.8 55.3
USD 19:00 Federal Open Market Committee Member Bullard Speaks    
 
Daily Currency Analysis by David Johnson

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