The US dollar is higher against most major pairs on Thursday. The greenback is only down against the Japanese Yen which rose 0.42 percent. Geopolitics and a strong dollar combined to keep stock markets under pressure.
EUR – Italian Budget Giving Euro Headaches
Italian budget comments from the EU commission pushed Italian bonds lower as the stand off between Brussels and Rome continues. Italian PM Conte will hold a meeting on Saturday to go over the already proposed budget. The EU commission is calling the proposal a “unprecedented deviation” from EU’s budget rules.
The single currency fell 0.29 percent on Thursday against the US dollar. The Italian budget drama put the euro in a corner as the release of the minutes from the latest Federal Open Market Committee (FOMC) and comments from voting and non-voting members support more US interest rate lifts.
The US Treasury Department published its currency report yesterday, and while not outright calling China a currency manipulator it did focus on past intervention and was first on a list of 6 countries on the monitoring list. The US and China are preparing talks at the G20 meeting next month.
The news that US Secretary pulled out of the Saudi Arabia investment conference after discussing with President Trump and Secretary Pompeo is seen as a conciliatory move from the administration to politicians who have called for some distance from the Middle East nation. Mnuchin joins a long list of businessmen and leaders who have excused themselves amid the disappearance of Khashoggi.
GBP – Pound Lower as Brexit Shows Sides are too far Apart
Sterling is down 0.63 percent against the greenback. Theresa May is still optimistic a “good deal” can be reached, but the reality appears to show the UK and the EU are too far apart with a fast approaching deadline and the currency market is reflecting that. Earlier the UK PM said that the EU proposal on the Irish border was unacceptable.
The EU and the UK have kept an optimistic demeanour when discussing the divorce with the press, but there does not seem to be that much progress from either side. The best so far have been extensions, and as the DUP party said extending the deadline will not solve the Irish backstop problem.
ECB President Mario Draghi said today that he sees Brexit’s effect as limited for the European economy with a higher risk coming from EU budget rules being challenged.