EUR 8.46 For Business Accounts Only

The Morning Track no-do-overs

- The Morning Track – No Do-Overs  by Bob Savage
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End of the Summer and there are no do-overs as Europe gets back to work and starts to think about the lessons learned and apply them for an Autumnal risk-rally. The problem remains one around politics and emerging markets. This week will focus still on Trump trade policy and how it plays out in Canada and Europe. Overnight stability in the CNY helped bring a bit of relief that China isn’t taking the bait and playing tit-for-tat with the US even as $200bn more in tariffs loom large. However, FX markets continued to show volatility, G10 focus was on GBP weakness. UK Brexit concerns dominated GBP today with UK PM May under further political pressure, her Telegraph editorial suggested no second referendum and no compromise to the Chequers plan which EU Barnier strongly opposed over the weekend. The AUD fell to 20-month lows with weaker retail sales. The EUR stuck in weaker part of range with Italy PMI at 2-year lows. But, Fitch affirmed Italy’s BBB rating Friday, while do
wngrading the outlook to negative, and Salvini offered that Italy’s budget with “touch” the 3% EU budget deficit limit but won’t break it. BTPs are bid and pressure on EU shares reversed. TRY stabilized after the CBRT vowed to take necessary actions to support price stability and said policy will be adjusted in the September meeting. This followed the 17.9% y/y inflation for August – showing TRY weakness driving prices. Argentina is waiting for a new fiscal plan today and hopes for more flexibility from IMF. The world seems a dangerous place and one where the economic data today reveals the cracks in optimism despite solid growth as both Asia and European PMI reports sag a bit and outlooks dive. The focus today is on the GBP which is the big mover while the shift tomorrow maybe back to the commodity currencies with the RBA and BOC decisions looming this week.