Is the next crisis finally here? Asian equities erased yesterday, with Chinese markets bearing the brunt. The CSI 300 fell 2.66%, while Hong Kong’s Hang Seng gave up 3.13%. In Europe, equities are also blinking red: the STOXX 600 fell 1.05% to 356 points, its lowest level since mid-December 2016.
In FX, the single currency held up surprisingly well against persistent tensions over the Italian budget. EUR/USD edged up 0.5%. Similarly, pound sterling, which rose 0.22% against the buck, trimmed losses as investors hope the European Union and UK will reach an agreement soon.
The European Commission will discuss Italy today. Italy said it would stick to its budget plans, although these breach EU rules. On Monday, Economy Minister, Giovani Tria told Brussels the budget is necessary to restore growth. Brussels usually takes a hard line against budget breaches; however, Italy insists on this one. We expect the EU Commission will reject Italy’s budget, but in a soft way that would keeps discussion open.
Therefore, we do not expect a strong reaction from financial markets. We also maintain our long EUR/USD view in the medium to long-term.
Disclaimer: While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.
Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.