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Coalition rebellion adds to final 5%

Coalition rebellion adds to final 5%

Domestic political tensions were on a rolling boil throughout yesterday’s trading; the spectre of a leadership change undermined confidence in Sterling. The Euro climbed to push below the 1.1300 mark and the Pound fell to near 1.2950 against the Dollar. Fragile risk appetite was also significant in curbing the UK currency, as a cheaper Pound seemed a risk too far. Optimism surrounding the forthcoming UK budget held sway.

Reports emerged that Northern Ireland’s DUP would back efforts to declare the EU’s Northern Ireland backstop illegal which sapped market sentiment further. Just before the death, further reports suggested that the planned legislation would be withdrawn and Theresa May re-iterated that 95% of the withdrawal agreement was done.

The Pound remains constrained by underlying political tensions this morning and opens just below 1.2950 against the Dollar and 1.1316 on the Euro. Bank of England Chief Economist Andy Haldane is due to speak at 11.30am.


The US currency was supported last night by US liquidity, especially against commodity currencies, as the EURUSD retreated to lows near 1.1450.

The Dollar held firm with US-Russia tensions surrounding nuclear arms control treaties underpinning the US currency amid expectations of tough Trump rhetoric into the mid-term elections. US President Donald Trump said that they would continue to build up their nuclear arsenal ‘until people come to their senses,’ and added that these comments were directed at Russia and China.

Events of note today will be the speeches by the Federal Open Market Committee members Kashkari, Bostic and Evans among a couple of other US minority data releases.


Italian PM Conte said yesterday that the planned budget deficit of 2.4% was the highest it would be and that his government would reconsider that number at a later point. After an initial rise in Italian bonds due to retaining an investment grade rating, yields declined sharply and, versus the Dollar, the Euro hit levels of 1.1550.

Increased Brexit pressures proved to be a turning point for the single currency and there was a sharp reversal in Italian markets. This was despite Di Maio reiterating his statement that Italy would not be leaving the EU. Against the Pound, the Euro retreated to the 1.1350 mark and, versus the Dollar, to the 1.1450 mark.

Germany will release its September PPI, the EU will offer preliminary Consumer Confidence for October, but all eyes, as per usual, will be on Italy and the news regarding Brexit. Bank of England Governor Carney is due to speak this afternoon but is not expected to create too much volatility.

Data to Watch:

04:00 AUD RBA Assistant Governor Bullock Speech
05:30 AUD RBA Assist Gov Debelle Speech
11:30 GBP MPC Member Haldane Speech
16:20 GBP BOE’s Governor Carney speech
18:30 USD FOMC Member Bostic speech

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