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Both the euro and the pound were already feeling some bearish pressure earlier. And that bearish pressure only intensified during today’s morning London session, sending both currencies to the bottom of the forex heap.

The pound’s slide was attributed to a reality check after last week’s positive Brexit-related headlines sent the pound higher across the board.

The euro’s slide, meanwhile, was blamed on Italy-related developments over the weekend. And it didn’t help that Italy’s Salvini delivered some rather combative comments during the session.

Other than those two, the yen is also worth highlighting since it was the top-performing currency of the session, likely because of the risk-off vibes in Europe and lack of action on the BOJ’s part to push JGB yields down.

The Aussie and Kiwi are also noteworthy since the two were nudged broadly higher despite falling commodity prices and the risk-off vibes in Europe. The Greenback was broadly weaker, though, which may have lent support to the Aussie and Kiwi. It’s also possible that the PBoC’s move may be helping to provide support for the two. Of course, it’s also likely that we’re just seeing some short-covering after last week’s beat-down.

  • Swiss jobless rate: 2.5% as expected vs. 2.6% previous
  • German industrial production m/m: -0.3% vs. 0.5% expected, -1.3% previous
  • Euro Zone Sentix investor confidence: 11.4 vs. 11.8 expected, 12.0 previous

Major Events/Reports:

Italy’s Salvini speaks

Italian Deputy Prime Minister (and leader of the euroskeptic League) Matteo Salvini spoke a few times during the session.

The first time he spoke, Salvini tried to reassure investors by reiterating that the Italian government is not planning to leave the euro, “not today, tomorrow or the day after.”

He also called on ratings agencies, saying that “I hope no one has prejudice toward this government, or strange intentions.”

However, in a later speech with French National Rally’s Marine Le Pen, Salvini took a more combative stance by lashing out against European Commission President Jean-Claude Juncker and Economic Affairs Commissioner Pierre Moscovici (yet again).

And this time, Salvini said that:

“We share the same idea of Europe, of agriculture, of work, of the fight against immigration.”

“We are against the enemies of Europe, who are Juncker and Moscovici, closed in the bunker of Brussels.”

And that’s not the end of it. In another speech, Salvini said that “We will not backtrack, we will not backtrack” on the budget.

This is in response to news over the weekend that Italy received a letter from the European Commission. And, well, the letter had these to say about Italy’s budget:

“Italy’s revised budgetary targets appear prima facie to point to a significant deviation from the fiscal path recommended by the Council. This is therefore a source of serious concern.”

“We call on the Italian authorities to ensure that the Draft Budgetary Plan will be in compliance with the common fiscal rules.”

A (cautious) message from Theresa May

Theresa May’s spokesman got some press time earlier and he struck a more cautious tone on the state of Brexit negotiations.

To be more specific, he stressed that (emphasis mine):

“It’s worth me pointing out that there is a difference between people talking optimistically about a deal and a deal – including both a withdrawal agreement and a future framework – actually being agreed.”

There remain big issues to work through and, as the PM has said, this will require movement on the EU side.”

Those comments were apparently in response to a report from last week that the E.U. supposedly believes that a divorce deal with the U.K. is “very close”, as well as a report that claimed that E.U. is supposedly getting ready to present “an unprecedented ‘super-charged’ free-trade agreement” to the U.K.

The spokesman was also asked if U.K. Brexit Secretary Dominic Raab will still meet with E.U. Chief Brexit Negotiator Michel Barnier this week.

However, the spokesman refused to comment on that, which implies that there may be a problem.

Gloomy start in Europe

Europe started the new trading week where the last one ended, so risk aversion is still the name of the game in Europe and the major European equity indices are starting the new week on the back foot.

And like last week, market analysts were still blaming the risk-off vibes on the elevated levels of U.S. bond yields.

However, growing concerns that the ongoing trade war between the U.S. and China would eventually have a negative effect on the Chinese economy were also cited for the risk off vibes.

Another reason cited for the risk-off vibes in Europe are renewed fears over Italy’s budget, which caused Italian banking shares to sink.

  • The pan-European FTSEurofirst 300 was down by 0.81% to 1,466.50
  • Germany’s DAX was down by 0.78% to 12,017.38
  • The blue-chip Euro Stoxx 50 was down by 0.69% to 3,320.55

U.S. equity futures were also weighed down by the risk-off vibes.

  • S&P 500 futures were down by 0.22% to 2,887.50
  • Nasdaq futures were down by 0.43% to 7,403.75

Major Market Mover(s):

GBP

The pound was the biggest loser of the session and is also currently the biggest loser of the day (so far).

The pound has been encountering sellers since earlier and market analysts attributed that to the Greenback’s strength, as well as profit-taking as investors reassess the probability that a Brexit deal can be successfully hammered out.

However, the pound’s slide accelerated when Theresa May’s spokesman delivered those cautious remarks during the session.

GBP/USD was down by 42 pips (-0.32%) to 1.3041, GBP/JPY was down by 104 pips (-0.70%) to 147.85, GBP/NZD was down by 110 pips (-0.54%) to 2.0209

EUR

The euro was the biggest loser of the session and is also currently the second biggest loser of the day (so far), thanks to renewed Italy-related concerns.

EUR/USD was down by 20 pips (-0.18%) to 1.1477, EUR/JPY was down by 72 pips (-0.55%) to 130.11, EUR/NZD was down by 70 pips (-0.39%) to 1.7786

JPY

The yen was the top-performing currency of the morning London session, likely because of the risk-off vibes in Europe, as well as lack of action on the BOJ’s part, even though the yields of 10-year JGBs are above 0%.

USD/JPY was down by 42 pips (-0.37%) to 113.37, CAD/JPY was down by 33 pips (-0.38%) to 87.27, CHF/JPY was down by 57 pips (-0.50%) to 114.17

Watch Out For:

  • Columbus day holiday in the U.S.A. today
  • Canada will be celebrating Thanksgiving day today