Currency Markets Remain Quiet, Asian Shares Start the Week Broadly Higher

Market Reviews

The currency markets remain steady in Friday’s range. Canadian Dollar is trading as the strongest one. The euro and the British pound remain under pressure against the US dollar, as investors await developments around Brexit, as well as the Italian budget plan, which has received strong criticism from the European Union. For the moment, Australian dollar is the weakest one. Japanese yen and Swiss franc are also weak.

On stock markets, Asian shares are in full risk-on mode. China’s Shanghai SSE leads the way by rising 4.56%. Hong Kong HSI gained 2.47%. Nikkei and Singapore Strait Times are both up 0.4%.

Italian Deputy Prime Minister Luigi Di Maio said the government is going to send EU a formal response on the “serious concerns” over its draft budget today. The response will provide explanations on raising budget deficit to 2.4% of GDP next year. Still, the European Commission is expected to formal reject Italy’s budget tomorrow. Meanwhile, Moody’s expressed concern over the budget deficit target of 2.4% of GDP in 2019, which is three times higher than prior target of 0.8% and lowered Italy’s credit rating to Baa3, from Baa2.

According to the UK Prime Minister Theresa May, the EU Brexit Agreement is ready for 95%. Still, the Irish border remains among the issues that are still uncoordinated between London and Brussels. May continues to reject the EU's proposals for Northern Ireland to continue to be in a customs union. The time for negotiations is less, as the UK's withdrawal from the EU is scheduled for March 29, 2019

ECB and Bank of Canada’s rate decisions will be in focus this week. Despite disappointing CPI data, BoC is widely expected to continue with this week’s rate hike. European Central Bank will hold its meeting on Thursday and it is unlikely to provide anything new. This week, the US will release durable goods, trade balance and Q3 GDP data.