FX FUNDAMENTAL ANALYSIS
European financial markets throughout 2016 with Brexit was averted. Macron handily won in France,
while German politics
remained more of less boring. It is all changing in 2018 as the Italian election produced
an
unprecedented backlash against m a i ns t r ea m political forces and is elevating populism to a new level.
Just a couple of
weeks the ago Spanish
prime minister Mariano Rajoy was ousted after years of battles with socialist opp o s i t ion parties. Pedro Sanchez from the Spanish Socialist workers Party is looking to steer the country to the left of the political spectrum and implement policies which might not be viewed favourably by its banking system bailout
partners from the EU.
The Spanish budget which aimed to bring down the public deficit below the common European Union ceiling of 3 percent is now unlikely to reach that goal. The establishment socialists in Spain hold just 84 seats in the 350-seat parliament and are proposing hikes in social security contributions in
26 FX TRADER MAGAZINE July - September 2018
The political escalation in Italy and Spain seems the main
trigger decline over the past three months
trigger for the euro’s decline which has persisted for the past three months. Dropping from 1.25 to 1.15 is no small move and the hopes that the long-term euro bull is alive are still up with some traders. However, in order for the pressure on the euro to get reversed, we need to see some changes in market sentiment towards the single currency area.
It’s a Question of Unity
The end of June saw a rise in hopes for euro bulls as Macron and Merkel have finally proposed a common
euro.
The fractured political landscape across the EU is the main challenge for the single currency going forward. The Italian election results delivered precisely what was feared by the marker last year when uncertainty about French and German elections weighed on the euro before it skyrocketed higher towards the 1.25 area. This year the faith of the single European currency will lie in the periphery of the Eurozone with Italy scoring a first major victory at the end of June
for the Euro’s
order to finance a rise in pensions and civil servants’ pay.
In hindsight, the recent escalation in Italy and Spain looks like the main
Eurozone budget after years of resistance from Germany. But can a consensus be built across the wider block on this issue? There is a slew of unknowns when it comes to
a consensus among
building all
E u r o z one m e mb er countries. How big should this common budget be, how will it be used by the block and how many countries aside from Germany and France will support
it…
All or at least some of these questions need answers before we see the next leg higher or lower in the
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57
