FX FUNDAMENTAL ANALYSIS
economic environment is now more centered around politics than ever before, and volatility on the other side of the Atlantic could prompt massive changes
for
Europe. Should the aggressive nature of Donald Trump persist to
the meeting was anything but certain. The tentative
agreement
lacked in detail and the fifteen-hour marathon which ended at 04:40
questionable at best. The party of the current prime minister holds 85 out of 350 seats in parliament. Moreover, the Catalan independence issue is still alive and well, especially after
the
former central government is now toppled.
pressure
the European Union on trade, that might yield a political response which will
be most
welcome by euro bulls - a strong and united anti- American front.
Bridging the Gaps Across the EU
From migration policy and the banking union, to fiscal and monetary policy, a pan-European consensus has been a very difficult thing to achieve for EU’s politicians. At the end of June, a through- the-night EU summit forged a consensus about migration policy. The market’s immediate response has been to send the euro higher across
the board. While the new
Italian prime minister Giuseppe Conte proclaimed that “Italy is no longer alone”, the outcome of
28 FX TRADER MAGAZINE July - September 2018
The immediate market response to the consensus about migration policy was to send the euro higher across the board
AM local time ended up providing vague details about migrant relocation plans.
One thing is certain after this EU summit, Andrea Merkel’s future as German chancellor appears to have been cemented and the crisis with her conservative partners at home - averted. This election cycle in the EU is officially over, but the stability of the Spanish minority government is
The key to p r e s e r vin g a
Eurozone
healthy is
unity and the lack of consensus is the biggest risk to European politics and consequently to the euro. With the path of ECB’s monetary policy more or less clear, the only driver of volatility (aside from US- related matters of course) is
the commitment of European governments to a unified stance on key issues facing the continent. So, if you are willing to bet on the future of
the single currency be vigilant
of EU politics and of course, don’t forget the increasing prospects for a global trade war.
Victor Golovtchenko Senior Editor
Foreign Exchange Markets
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