We now focus on the U.S and China tensions, Brexit and Italy

Weekly Report - 15/10/2018

We now focus on the U.S and China tensions, Brexit and Italy


Today Monday is considered to be the most important day for Italian administration, due to the fact that the deadline for the budget plans that they must present to the European Commission is today. We will also focus on the fact whether the European Commission announces its plan to discard the budget that would probably create more uncertainty for the markets. We can presume that more talks and pressure will affect government bond and risk appetite and that will probably kick in in the following week.

As for the two countries the US and China, we can assume that the markets will probably remain in focus while trade war discussions - tensions among the two administrations have increased. One fact that escalates the tensions even more, are the spy accusations that could drive to even more duties and probably penalties. The U.S Treasury’s currency statement presented to Congress discovered that China wasn't a currency manipulator. That fact estimated to be positive for the markets in the week ahead.

The Week that was

Last Wednesday we had a very sharp drop in stocks probably because investors extended their selling longer-dated Treasuries. While Treasuries were sold, yields most of the time move to the opposite price, and that drives up the interest rates for consumer and business loans. On the same day, the International Monetary Fund reduced its global economic growth forecasts for 2018 and 2019 and oil prices went lower.

On Thursday Gold prices dropped as strong U.S. data supported the possibilities for new U.S. interest rate hikes next year, though a softer US- Dollar can take losses.U.S. Gold futures went up 0.2% to $1,195.89 an ounce and Spot gold fell 0.2% at $1,192.59 an ounce.


Main Focus This Week

While November is around the corner, we expect that Brexit discussions will be on focus this week and probably they will increase volatility on the popular pair GBPUSD. While the British administration discussions on Brexit with the European Union in Brussels, any development in our expectations of a settlement, will present a strong support for the Pound and for the British PM. Now on the opposite side, an Absence of positive data and the Pound will probably create a negative sentiment. The following week is estimated to be one of the last opportunities for the European Union and UK to close a deal.


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