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By xemarketanalysis June 11, 2018 2:23 pm
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    XE Market Analysis: Euro Gains After Italy Reassures on Currency and Debt

    OVERVIEW

    • Markets are in an upbeat mood as Trump and Kim prepare to meet in Singapore.
    • UK data suggests the economy is still struggling for momentum.
    • Big week ahead with Fed and ECB meetings.
    • Canadian Dollar under pressure after G7 row.
    • Turkey's economy surges in Q1 despite weak currency and surging borrowing costs.

    HIGHLIGHT

    The Euro rose back above 1.18 versus the US Dollar after Italy's new Economy Minister, Giovanni Tria, said yesterday that the new coalition government has no intention of leaving the Euro and plans to focus on cutting debt levels. This provided some reassurance to investors that the populist government is not about to blow up the budget deficit with its policies such as a universal income and plans to raise the state pension. 

    US DOLLAR

    The US Dollar is generally weaker after a pick-up in market sentiment that has left the mighty Dollar in less demand. Initial trading that was dominated by concerns over Trump's announcement that he was backing out of the joint G7 communique, driving demand for the USD, but as the focus turned to the historic meeting of Trump and Kim Jung Un, sentiment improved. The US calendar highlight is the Fed on Wednesday evening but there’s also CPI and retail sales data.  

    BRITISH POUND

    The Pound fell sharply early in the European session after data showing manufacturing and industrial production both unexpectedly slumped from March, with factory output seeing its biggest monthly fall in over 5 years. The data will likely keep the Bank of England on hold for now, but employment and retail sales data this week will be watched closely, with momentum in earnings growth a key factor for the BoE’s deliberations next week.  

    EURO

    The Euro is broadly higher across the board after reassuring comments from the new economy minister (see highlight). The key event in Europe this week will be the ECB meeting on Thursday, where a discussion on exiting QE is expected. 

    CANADIAN DOLLAR

    The Canadian Dollar is weaker after Donald Trump attacked PM Justin Trudeau in their feud over trade, with Trump tweeting Trudeau’s remarks at a news conference where he said Canada would not be pushed around but “were very dishonest and weak". The comments appear to highlight worsening relations between the two neighbors, with the risks high for Canada's economy if NAFTA talks fail, as 75% of Canada's exports going to the US. 

    AUSTRALIAN DOLLAR

    The Australian Dollar is marginally higher on the session, recovering from earlier declines due to trade fears following the fractious G7 meeting. The key economic events this week are employment data for last month, along with the latest business confidence index and consumer sentiment.

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