The Kiwi was rushed by buyers late into the session, which allowed the Kiwi to steal the top spot from the Greenback.
The euro and the pound, meanwhile, were in a race to the bottom, with political uncertainty weighing down on the former and Brexit-related jitters sapping demand for the latter.
- German WPI m/m: 0.5% vs. 0.2% expected, 0.0% previous
- German PPI m/m: 0.5% vs. 0.3% expected, 0.1% previous
- Euro Zone current account: €32.0B vs. €35.1B expected, €36.8B previous
- Euro Zone trade balance: €21.2B vs. €20.7B expected, €20.9B previous
- Canada’s retail sales and CPI reports coming up; read Forex Gump’s Event Preview
Italian parties hammer out deal
The 5-Star Movement and the League party of Italy announced earlier that they have finally worked out a deal to form a new coalition government.
Both parties are openly anti-E.U. parties, which is unnerving enough for investors.
However, the provisions of the deal are also seen as being a cause of conflict with the E.U., particularly the provisions with regard to “billions of euros in tax cuts, additional spending on welfare for the poor, and a roll-back of pension reforms,” as well as provisions that “called for a review of EU governance and fiscal rules” as a Reuters report puts it.
On a more optimistic note, the deal does not include provisions to scrap the euro.
The deal still doesn’t name who the next Italian Prime Minister will be, however.
China denies trade deal rumors
Yesterday, there were rumors (courtesy of the New York Times) that China was supposedly willing to buy more American goods in order to reduce the surplus with the U.S. by up to $200 billion.
Well, Chinese foreign ministry spokesman Lu Kang shot that rumor down during the session when he flat out said that:
“This rumor is not true. This I can confirm to you.”
“As I understand, the relevant consultations are ongoing and they are constructive.”
Gloomy ending in Europe
Europe is ending the week on a sour note since the major European equity indices were mostly in the red during the morning London session.
The major European equity indices apparently got dragged lower by the slump in Italian shares.
And Italian shares, in turn, were down in the dumps because of earlier news that the anti-establishment 5-Star Movement and the League party have hammered out a deal to finally form a new coalition government in Italy.
- The pan-European FTSEurofirst 300 was down by 0.15% to 1,550.69
- Germany’s DAX was down by 0.08% to 13,104.52
- The blue-chip Euro Stoxx 50 was down by 0.04% to 3,585.05
Will risk appetite get revived?
The major European equity indices may have been down in the dumps. However, there are signs that risk appetite may get revived in the upcoming U.S. session since U.S. equity futures were broadly in the green.
- S&P 500 futures were up by 0.15% to 2,722.75
- Nasdaq futures were up by 0.17% to 6,917.75
And market analysts say that U.S. equity futures were in positive territory because of the rise in oil prices and cautious optimism that trade talks between the U.S. and China will go well.
Major Market Mover(s):
The euro was swamped by sellers and is the worst-performing currency of the morning London session.
And looking at price action, the euro apparently started to slide across the board after the 5-Star Movement and the League party of Italy announced that they have finally worked out a deal.
EUR/USD was down by 32 pips (-0.27%) to 1.1784, EUR/CAD was down by 40 pips (-0.27%) to 1.5095, EUR/NZD was down by 68 pips (-0.40%) to 1.7045
The pound was the second worst-performing currency of the session. There weren’t any direct catalysts for the pound’s weakness, but market analysts were pointing to Brexit-related uncertainty as traders speculated on whether or not the U.K. will stay in the customs union after the transition deal ends.
GBP/USD was down by 20 pips (-0.15%) to 1.3495, GBP/CAD was down by 25 pips (-0.14%) to 1.7286, GBP/NZD was down by 52 pips (-0.27%) to 1.9522
The Greenback was the best-performing currency for most of the morning London session. However, the Kiwi got rushed by buyers late into the session, allowing the Kiwi to steal the top spot from the Greenback.
There’s no clear reason for the Kiwi’s late rise, but signs that risk appetite may get revived in the upcoming U.S. session may have helped to spur demand for the higher-yielding Kiwi.
NZD/USD was up by 8 pips (+0.12%) to 0.6912, NZD/JPY was up by 18 pips (+0.24%) to 76.70, NZD/AUD was up by 20 pips (+0.22%) to 0.9194
Watch Out For:
- 12:30 pm GMT: Headline (+0.3% expected vs. +0.4% previous) and core (+0.5% expected vs. 0.0% previous) readings for Canadian retail sales
- 12:30 pm GMT: Canada’s headline CPI reading (0.4% expected vs. 0.3% previous); read Forex Gump’s Event Preview
- 1:15 pm GMT: U.S. Fed Governor Lael Brainard is scheduled to speak
- 1:15 pm GMT: Dallas Fed President Robert Kaplan will give a speech