August France Markit composite PMI 55.6 vs 55.4 expected
August France Markit composite PMI 55.6 vs 55.4 expected
August Germany Markit composite PMI 55.7 vs 54.7 expected
It’s over for Italy and maybe the euro and everyone knowns it
European Commission had accused coalition government of breaching budgetary rules.
The leaders of Italy’s populist coalition government said they had no intention of leaving the euro but will stick with spending plans that have triggered both a credit rating downgrade and sharp criticism from Brussels.
Both Luigi Di Maio, leader of the anti-establishment Five Star party, and his coalition partner Matteo Salvini, leader of the anti-immigration League party, said they remained committed to Italy staying within the single currency.
“As long as I remain political head of the Five Star Movement and as long as there is this government there is no will on our part to leave the European Union or the eurozone,” Mr Di Maio said on Saturday after the two leaders reached an agreement over the details of a tax amnesty policy that had caused friction within the coalition earlier in the week.
The European Commission last week said that Rome’s plans to introduce expensive policies including a basic income for poor Italians and a lowering of the retirement age would result in a breach of budgetary rules that would be “unprecedented in the history” of the European Union. The Italian government is expected to send a written response to the criticism on Monday.
Mr Salvini, who in the weeks following the budget announcement has launched repeated broadsides at European institutions and “speculators” who have pushed Italy’s borrowing costs sharply higher, also said that he remained committed to staying in the single currency.
“There is no intention to leave the EU or the single currency, we are fine in this continent whose rules we want to change,” Mr Salvini said.
Prime Minister Giuseppe Conte, a law professor previously unknown in Italian politics before he was appointed head of the coalition between Five Star and the League, said that he would seek to convince the commission of the merits of its spending plans.
“The most important thing is to explain the manoeuvre to our European interlocutors,” he said. “We are launching the biggest structural reform plan in the history of Italy”.
On Friday evening the credit rating agency Moody’s lowered its rating of Italy’s sovereign debt to one level above what would be considered a high risk, or junk investment, citing the government’s spending plans as the trigger.
“The recently announced material shift in fiscal strategy, with significantly higher budget deficits planned for the coming three years compared to earlier expectations” would mean “rather than falling over the coming years as was projected under the previous government’s fiscal stance, Italy’s public debt will instead remain around the current 130 per cent of GDP,” Moody’s said.
Italy has the largest public debt as a proportion of economic output of any country in the eurozone apart from Greece, meaning financial markets are acutely sensitive to any increase in government spending or slow down in growth.
To fund its policies the government has said it will expand Italy’s budget deficit for next year to 2.4 per cent of GDP, up from a pledge by a previous government of 0.8 per cent. Rome has said that the expansion in spending will be paid for in part by forecasts that the Italian economy will grow by 1.5 per cent next year, a prediction far in excess of consensus.
Last week the Bank of Italy said that available data suggested the eurozone’s third-largest economy grew just 0.1 per cent in the third quarter compared with 0.2 per cent in the previous three months
Another major rating agency, S&P, is due to update its view on Italian debt next Friday in a move that will be closely watched by investors the country’s government bonds.
Source: https://www.ft.com/content/9b324788-d4b ... e0dcf18713
Italian yields fall sharply to support euro and risk
It seems as though major markets are on something of a knife-edge at the moment. There are a plethora of reasons that should illicit fear and caution, with tensions over relations with Saudi Arabia (and how this could impact on the oil price), the US/China trade dispute, the Italian budget and the impasse for Brexit negotiations to name but a few. This is leading to a move towards renewed dollar strength. Treasury yields continue to tip toe higher, and this is allowing the dollar to nudge ahead on performance, whilst equity traders remain on edge. However, if any one of these geopolitical tipping points is reached then, things could quickly turn sour again. Yields would fall, the yen would be a strong performer once more, and gold would make a renewed break higher. In all of this, the biggest move would likely be saved for a fall on equity markets, with an outlook now that seems to be far more nervous than we have seen for at least six months (at least on the VIX). However, this morning, there is mood of positive risk with some good news to focus on (for a change). On a quiet day of data, the immediate focus is on the Italian budget this morning and news that credit ratings agency Moodys has decided its outlook on Italy is “stable” from negative watch. Italian yields have fallen over 20 basis points and with the Italian government ready to discuss its budget with the EU, there is a rare air of positivity now, helping the euro perform better today. With Chinese equities sharply higher this morning, there is an early positive start to the week, but can it last this time?
Wall Street closed nervously on Friday (S&P 500 -1 tick at 2768 whilst futures are marginally higher. Asian equities were much stronger overnight, with China Shanghai Composite leading the way 3.8% higher. European markets are marginally positive today with Eurozone markets likely to outperform on the improved Italy debt story. In forex, the euro is gaining ground whilst the yen is the main underperformer. For commodities, gold is around flat, whilst oil is also supported.
There are no key economic releases due on the calendar today.
Chart of the Day – AUD/JPY
Aussie/Yen remains a very good indicator of risk appetite and with markets seemingly in the balance again, this could be an interesting market to use as a gauge again. It would appear that the old pivot at 80.50 is one more a barrier to the recovery. However, what could be seen as an encouraging sign is that momentum is showing signs of improving again. The RSI pulled to a two and a half week high on Friday and suggests a potential upside break above 80.50. The MACD lines are also bottoming out too. It is though important to say that a recovery is forming and there is still an ongoing medium term bear bias to the market (ever since the breakdown below 80.50). This is reflected in the fact that the moving averages are all in bearish decline still, so any recovery would be counter-trend. However, the hourly chart shows that above 80.60 would complete a small base pattern and imply around 150 pips of recovery towards 82.00, but give this would be a bear market rally, the weight of overhead supply (next resistance at 81.30) and trading against the trend may restrict any recovery momentum. There is a minor higher low at 79.50 as support now.
Read more: https://www.hantecfx.com/italian-yields ... -and-risk/
- Disappointing Euro-zone PMI prints prompt some aggressive selling on Friday.
- Investors scale back ECB rate hike expectations and add to the selling pressure.
- Technical picture support prospects for an extension of the intraday bearish slide.
The EUR/USD pair extended its intraday retracement slide and dropped to fresh weekly lows, below mid-1.1300s in the last hour.
The pair continued with its struggled to make it through the 1.1420-30 strong resistance and met with some heavy supply following the disappointing release of flash Euro-zone PMI prints for Nov., in particular from the region's largest economy - Germany.
Weak German and Euro-zone PMI data prompted investors to further scale back expectations of an ECB 2019 interest rate hike and prompted some aggressive selling around the shared currency.
As cited by ECBWatch, money market futures dated to ECB's December 2019 meeting now price in around 88% chance of 10 bps rate hike, down from 95% seen earlier this week.
Adding to this, a fresh wave of sell-off in oil prices prompted some risk-off trade and provided a minor lift to the US Dollar's relative safe-haven status against its European counterpart, which exerted some additional downward pressure on the pair.
Meanwhile, possibilities of some short-term trading stops being triggered on a sustained break below the 1.1365-60 region, previous weekly low, might have further collaborated to accelerate the downfall.
Hence, a follow-through weakness, led by some fresh technical selling amid absent relevant market moving economic releases from the US, now looks a distinct possibility on the last trading day of the week.
Technical levels to watch
As Yohay Elam, FXStreet own Analyst writes: “Support awaits at 1.1355 which supported the pair early in the week. 1.1300 used to be a double bottom and 1.1215 is the 17-month low.”
“Resistance awaits at 1.1395 which supported the pair late last week. Breaking above the 200 Simple Moving Average which is just above 1.1420 is critical to moving up. 1.1475 was the peak at the wake of this week. 1.1500 is the peak seen in early November,” he added further.
EURAUD opened with a gap down on Monday, extending the steep downfall off 1.6356 to a six-month low of 1.5344. The move painted a more bearish picture for the market, with the MACD suggesting that some weakness is still in storage as the indicator has reversed back below its red signal line. Yet the RSI and the Stochastics signal that the market is oversold, and upside corrections might emerge in the very short term.
On the upside, the pair is expected to find immediate resistance around the 78.6% Fibonacci of the upleg from 1.5272 to 1.6356, near 1.5500 – the area that has restricted both upward and downward movements in the past. Moving higher, bulls might find resistance around 1.5578, taken from the lows on August 7, before continuing up the path to the 61.8% Fibonacci of 1.5685. Traders, however, would be eagerly looking for a close above 1.5880 to confirm that gains are sustainable.
If it falls lower, the pair could retest yesterday’s trough of 1.5344 ahead of the 1.5272 bottom formed in June. Should the pair breach the latter, bearish action may pick up steam towards 1.5153, the low on January 11, while further declines may bring the previous 1.5080 support into view.
In the bigger picture, the pair is in neutral mode, trading within the 1.5272-1.6356 range. However, downside risks seem to be rising as the 50-day simple moving average has already changed direction to the downside to meet the 200-day MA.
Summarizing, EURAUD is bearish and oversold in short term, while in the medium term the pair is neutral.
Source: https://www.xm.com/technical-analysis-e ... ched-91581