Euro Loses Ground as Political Tension in Eurozone Increases

Market Reviews

The euro is trading at about a weekly low against the US dollar, as criticism of the European Commission regarding the populist budget of Italy caused new concerns about political tensions in the Eurozone. The British pound is also weak, as the currency is pressured by Brexit uncertainties. The US dollar is firm. Meanwhile, Australian dollar and New Zealand dollar are the strongest ones.

On stock markets, DOW fell by 1.27% overnight, S&P 500 dropped by 1.44% and NASDAQ lost 2.06%. In Asia, Nikkei declined by 1.06%, Singapore Strait Times was down 0.24%, Hong Kong HSI lost 0.34%. China Shanghai SSE hit low 2449.20.

The European Commission stated that the Italian budget project for 2019 seriously violates the rules of the budget of the European Union. The Commission stated, that the planned public spending was too high, the structural budget deficit did not fall, and Italy’s public debt did not decrease in accordance with EU rules. This has raised concerns about the growing political tensions between Brussels and the Eurozone.

Economic growth in China slowed to the weakest pace after the global financial crisis in the third quarter and was below economists' expectations. China’s Q3 GDP growth slowed to 6.5% yoy, down from 6.7% yoy in Q2 and missed expectation of 6.6 yoy. That’s also the weakest reading since Q2 of 2009. On quarterly basis, growth slowed to 1.6% qoq, down from Q2’s 1.8% qoq.

Also released from China, industrial production grew 5.8% yoy in September, down from 6.1% and missed expectation of 6.0% yoy. Retail sales rose 9.2% yoy, up from 9.0% yoy and beat expectation of 9.0% yoy. Fixed asset investment rose 5.4% ytd yoy, up from 5.3% ytd yoy and beat expectation of 5.3% ytd yoy.

Annual core consumer inflation in Japan rose in September, but it remains half the central bank's 2% target, as the escalation of trade friction darkens economic prospects. Japan national CPI core rose 1.0% in September, after rising 0.9% in August.