Daily Analysis - 31/05/2018
Headlines out of Italy continue to stream in. While tensions have not escalated further, the political back and forth is still going on, creating uncertainty in the markets. The euro has reacted depending on the news, whether it was positive or negative but is generally on the upswing.
All eyes are on Italian politics today. Worries about Italy leaving the euro have eased and the latest developments indicate that snap elections may be avoided if a government is in place today and Mattarella points an economy minister acceptable to the populist party. Meanwhile, Eurozone inflation data will also be closely watched. Forecasts are for a rebound in May, at 1.6% from April's 0.7% year-on-year. The euro continues to trade in the $1.16 handle.
The loonie rallied sharply on Wednesday after the Bank of Canada gave a hawkish outlook for the Canadian economy. While it held rates at 1.25%, there are expectations for a rate hike in July. As a result, USD/CAD tumbled, reaching as low as 1.2835. Canadian GDP data are due later today.
WTI oil rallied above $67 a barrel on Wednesday after Reuters reported that Russia’s central bank expressed caution on plans to boost oil supply. If there is a surprise increase in U.S. crude oil inventories in the EIA report later today, we could see an easing in prices.
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