Euro Hovers Near 7-Weeks Low as Markets Stay at Risk Aversion Mode

Market Reviews

Japanese yen and US dollar are the strongest ones, followed by Australian dollar, as risk aversion continues to dominate the markets. Euro and British pound are trading as the weakest ones. Italian 10 year yield increased 0.062 to 3.629. Earlier today, Italian 10 year yield hit as high as 3.712. German 10 year yield gained 0.017 to 0.551. German-Italian yield spread widens further to above 310.

The euro is falling against the US dollar for the second session in a row, with the EUR/USD pair reaching a 7-weeks lows. Pressure on the single currency was caused by a number of factors, including the growth of the dollar, as well as concerns about the budget of Italy. Italy is not doing to back down on its budget deficit plan despite strong criticism from EU. Additional pressure on the euro was produced by weak German trade data and IMF’s growth forecasts downgrade.

German exports were down 0.1% to 110.3 billion euros ($126.24 billion) in August, in seasonally and calendar adjusted numbers. Imports decreased 2.7% to 92 billion euros. In seasonally adjusted term, German trade balance widened to EUR 18.3B in August.

The IMF cut its growth forecasts for both 2018 and 2019. Eurozone economic growth is projected at 2.0% (2.4% prior) in 2018 and 1.9% (2.0% prior) in 2019. Meanwhile, German economy is expected to be 1.9% (2.5% prior) in 2018 and 1.9% (2.0% prior) in 2019. The German government is due to release its updated economy forecasts this Thursday. And it’s expected that there would be downward revision to growth for this year and next too.

The growing conviction that the Fed will raise rates in December has led a 10-year Treasury bond yields to a 7-year high, which supported the dollar. The US 10-year Treasury note, which serves as a benchmark for a wide range of lending activities, rose 2.4 basis points to 3.254%, pushing above the 3.25% threshold for the first time since late April 2011. 30-year treasury bonds climbed to 3.44%, a four-year high.

Global shares were mostly down today. DAX lost 0.59%, CAC dropped by 0.42%, FTSE fell by 0.50%. In Asia, Nikkei closed down 1.32%, Singapore Strait Times fell by 0.47%. Hong Kong HSI lost 0.11%. China Shanghai SSE gained 0.17%.