- Forex today was volatile in the absence of full markets during the North American session with the dollar hitting a fresh high and cable being the worst performer.
- The USD retained its stronger tone against the euro as anxiety about the outcomes of the Brexit negotiations and Italian budget talks with the EU weighed.
Analysts at ANZ noted that Equity markets were pressured by the uncertainty and the ongoing backdrop of Fed policy tightening:
"The DAX closed off 1.8%, the CAC 40 down 0.9% and FTSE 100 off 0.7%. At the time of writing, the S&P500 was off 1.4% and Nasdaq down 2.4%, with signs of weak iPhone demand weighing on tech stocks (Apple -4.2%). The US Treasury market was closed for Veterans Day. Oil rebounded as the market continues to digest production cuts, with WTI up 0.7% at USD60.6/bbl. Gold is currently down 0.6% to USD1202.8/oz."
Currency action:
EUR/USD has been extending losses throughout an illiquid North American session due to veteran's day falling from 1.1325 to 1.1239, a low since June 2017 amid concerns the Italian budget impasse could escalate. As analysts at Westpac noted, "tensions remain into today’s deadline on responses to EU’s rejection of the initial budget proposals (not only for Italy) while the Italian government continues to hold staunchly to their proposal." The markets chopped the euro down to size all the way through the pivot line at 1.1258 while the greenback made fresh highs to 97.69 in the DXY. Cable was down at 1.2827 in European trade but was rallying higher to 1.2936 before falling back to 1.2843 on conflicting Brexit headlines. There is still no breakthrough and political tension within May’s minority government continue to weigh on the prospects of a Brexit deal being passed through Parliament. EUR/GBP was volatile and was falling from 0.8774 to a low of 0.8709 on negative sentiment over Italy before rallying back to 0.8758 and then back to 0.9729. USD/JPY slipped from the 114 handle despite a strong dollar. USD/JPY was up at 114.20 before falling to a low of 113.66 while the US 10yr treasury futures implied yields fell from 3.18% to 3.15%. Fed fund futures yields continued to price the chance of another rate hike in December at 75% - (Bond market was closed). AUD/USD was caught up in the progress in the greenback and fell to a low of 0.7171.
Key notes from overnight:
BREXIT deadlines: will a November Summit will occur? - ANZ
Key events ahead:
Key risks: Aussie busy week kicks off today - Westpac
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