Euro Broadly Higher After Italy Announces New Budget Plan

Market Reviews

Euro strengthens today, after the news about Italian budget plan. The 5-Star Movement leader Luigi Di Maio has said that the coalition government is “not turning back from the 2.4% target” referring top budget deficit in terms of GDP. However, it’s reported the coalition has tweaked to plan to cut percentage down the road. The final version could be budget deficit at 2.4% of GDP in 2019, then 2.2% in 2020 and 2.0% in 2021. That would be better than the reported plan of 2.4% through the next three years.

The British pound also recovers, as markets prefer for UK PM Theresa May’s speech at the Conservative Party Conference in Birmingham. For now, New Zealand dollar and Australian dollar are the weakest ones today, followed by Swiss franc. The US dollar is trading near 1-month high against major currencies.

Risk aversion continues to dominate Asian markets today. Hong Kong HSI is extending yesterday’s losses and is down 0.52%. Nikkei lost 0.71%. Singapore Strait Times gained 0.80%. Overnight, DOW made record high at 26824.78 before closing at 26773.94, up 0.46%. S&P 500 fell by 0.04% while NASDAQ lost 0.47%.

Robert Kaplan (Dallas Fed President), said on Tuesday that he was satisfied with another increase in interest rates in the US this year and two more next year, but this may change if he sees that economic growth will be restrained. Last week, the Fed raised interest rates for the third time this year to a range of 2-2.25%.

Fed Chair Jerome Powell stated yesterday, that there’s a “remarkably positive outlook” in the economy. And the forecasts are “not too good to be true”. The US is now in favorable condition with unemployment rate at near 20-year low at 3.9%. And inflation is running near Fed’s target of 2%. A wide range of data and prices also supports a positive view while these favorable conditions are forecast to continue.