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US Open Preview – Yen recoups losses despite dollar strength; oil & gold on slippery road
October 8, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day Ahead: Quiet day with some developments in Italian politics and Brexit negotiations
Economic releases will be light in the remainder of the day, with Japanese current account figures being next in focus on Tuesday. US bond markets will remain closed in celebration of Columbus Day on Monday, though Wall Street will be open.
One of the major releases this week will be the minutes of the latest European Central Bank policy meeting on September 13. Following the upbeat remarks of President Draghi at the conference, it will be interesting to see on Thursday whether other ECB officials are on the same page. Investors could turn sensitive to any comments regarding future rate hikes after the ECB member Klaas Knot said on Monday that policymakers will start discussing on the timing of rate rises in January. He also admitted that increases in borrowing costs might come sooner or later than guided, but the euro continued to move lower.
Any developments related to the Italian fiscal policy could move the euro during the week as well. Note that the Italian government published a draft of its spending plans for 2019 and announced its deficit targets for the subsequent two years. Although Italy kept its deficit goal below EU’s debt threshold of 3.0% of GDP, EU officials showed dissatisfaction, arguing that Italy’s budget plans deviated significantly from previous commitments. Rome said that deficit goals for 2020 and 2021 will be lowered but investors worry that the EU might maintain a hardline against the final plan, that is to be handed to the European Commission by October 15.
In terms of Brexit negotiations, optimism for the EU and the UK finding a common ground regarding divorce terms resurfaced at the end of the previous week. It is hoped that a deal could be struck on the Irish border issue, a sticking point in Brexit talks, before a relevant summit on October 17. Sterling will likely stay sensitive to any hints of progress in these talks. This week, the UK Brexit Secretary, Dominic Raab will fly to Brussels to present new proposals on the Irish border as promised by the British Prime Minister. On Tuesday the British Parliament will hold a meeting, though Brexit will not be on the agenda this time despite next week’s deadline. Lawmakers are scheduled to discuss on the budget instead, which is due at the end of the month.
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