Article Highlights

  • Italy’s Matteo Renzi resigns as Italy’s Prime Minister
  • New Zealand’s John Key resigns as Prime Minister
  • AU AIG services index up from 50.5 to 51.1 in November
  • AU MI inflation gauge inches up by 0.1% vs. 0.2% in October
  • NZ ANZ commodity prices up by 2.7% vs. 0.7% uptick in October
  • U.K. BRC shop price index declines by another 1.7% in November
  • AU quarterly company operating profits up by 1.0% vs. 3.1% expected, 6.5% previous
  • China’s Caixin services PMI up from 52.4 to 53.1 vs. 52.7 previous
  • Japan’s consumer confidence down from 42.3 to 40.9 in November
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Forex market players started the week with a bang, as they saw not one, but TWO Prime Ministers resign during the trading session.

Major Events:

Italy votes “NO,” Renzi to step down – In another sign that populist, anti-establishment movements are in vogue this year, Italy just voted a “NO” in its highly-anticipated referendum over the weekend.

For newbies out there, you should know that Italy’s Prime Minister Matteo Renzi had asked a referendum to change the constitution and Parliament structure to help make it easier on the government to enact key changes. Italians said “no thanks” to the notion with an overwhelming 60% voting “NO.”

With a 68% voter turnout, PM Renzi called the referendum a “feast of democracy” and, as promised, promptly announced his intention to submit his resignation to Italy’s President Sergio Mattarella on Monday afternoon. Not surprisingly, the uncertainty over Renzi’s resignation has weighed on the euro across the board.

John Key resigns as NZ’s PM – As if Renzi’s drama is not shocking enough for a trading session, New Zealand’s Prime Minister John Key surprised the markets by resigning from his post after eight years on the job.

In a speech, Key cited family reasons as the cause of his stepping down not only as Prime Minister but also as leader of the National Party where he won his third term back in September 2014. He also shared that he won’t be seeking fourth term in the 2017 elections.

Key has set December 12 as the official date of his formal resignation, while his replacement will be chosen in a caucus meeting later this week. He has thrown his weight behind Deputy Prime Minister Bill English. English, however, hasn’t decided if he wants the position, saying that he will still discuss the matter with the National caucus and his family over the next few days.

Mixed data from Australia, China – Risk appetite recovered a bit after the initial selloffs, thanks in part to better-than-expected lower-tier reports from both Australia and China.

Australia’s AIG services index came in at 51.1 in November after clocking in at 50.5 in October while China’s services PMI also printed better numbers than analysts had estimated. The Aussie’s gains were limited though, likely because Australia’s inflation gauge and quarterly operating profits missed analyst expectations.

Major Market Movers:

JPY – Yen crosses started the week with weekend gaps, as Italy’s “NO” vote weighed on risk appetite. The tides turned, however, as soon as market players have calmed down a bit and traders concentrated on China’s better-than-expected services PMI release.

EUR/JPY dropped to 118.74 before closing at 119.69, USD/JPY fell to a low of 112.88 before recovering to 113.46, and GBP/JPY plummeted to 142.48 before finishing the session at 144.03.

EUR – The euro gapped lower across the board after Italy voted a resounding “NO” to Renzi’s proposed constitutional changes.

EUR/USD opened at 1.0625 after closing at 1.0658 last week and hit a low of 1.0506 before taking a breather at 1.0548. Ditto for EUR/JPY, which opened at 120.68 after closing at 121.19. It also hit a low of 118.74 before coming back up to 119.69.

NZD – The New Zealand dollar was attacked by forex bears first thing today after PM John Key surprisingly resigned from his position.

NZD/USD fell to a low of .7070 before settling back up to .7105, NZD/JPY dipped to 80.15 before recovering to 80.62, and AUD/NZD jumped to 1.0509 before settling back down to 1.0481.

Watch Out For:

  • 9:15 am GMT: Spanish services PMI (55.1 expected, 54.6 previous)
  • 9:45 am GMT: Italian services PMI (51.4 expected, 51.0 previous)
  • 9:50 am GMT: French final services PMI expected to remain at 52.6
  • 9:55 am GMT: German final services PMI expected to remain at 55.0
  • 10:00 am GMT: Euro Zone final services PMI expected to remain at 54.1
  • 10:30 am GMT: Sentix investor confidence (14.7 expected, 13.1 previous)
  • 10:30 am GMT: U.K. services PMI (54.2 expected, 54.5 previous)
  • 11:00 am GMT: Euro Zone retail sales (0.9% expected, -0.2% previous)

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