Euro Up as Italy Fears Cool, Canadian Dollar Down on NAFTA Talks

TALKING POINTS – EURO, ITALY, NZ DOLLAR, YEN, CANADIAN DOLLAR, NAFTA

• Euro edges up from five-month low as Italy-linked worries cool
• NZ Dollar gains, Yen falls as risk appetite firms in APAC trade
• Canadian Dollar falls as Lighthizer deflates NAFTA deal hopes

The Euro managed to recover a bit of lost ground in Asia Pacific trade after sinking to a five-month low against an average of its major counterparts yesterday. The spread between German and Italian 10-year Treasury bond yields narrowed a bit yesterday, hinting at ebbing worries about the likely politics of an emerging anti-establishment coalition government in Rome.

That yield spread hit the highest level since January earlier in the week, reflecting a rising risk premium to owning Italian paper. Markets turned jittery as the populist Five-Star Movement and the right-wing League negotiated a joint policy platform. Rumors suggested it might include a demand for the ECB to cancel a large chunk of Italian debt.

Elsewhere, currency markets took their cues from broad-based risk appetite trends. The frequently sentiment-geared New Zealand Dollar traded higher alongside regional share prices to outperform against its G10 FX counterparts. Corrective flows probably helped as well after the currency’s outsized losses yesterday. The perennially anti-risk Japanese Yen was weakest on the session.

The Canadian Dollar declined as well, building on losses sustained in late North American trade after US Trade Representative Robert Lighthizer said NAFTA countries are “nowhere near a deal” on a renegotiated trade pact. Defensive pre-positioning ahead of April’s CPI report may have played a role as well. The on-year inflation rate is expected to hold steady at 2.3 percent.

See our free guide to learn how to use economic news in your trading strategy !

ASIA PACIFIC TRADING SESSION

EUROPEAN TRADING SESSION

** All times listed in GMT. See the full economic calendar here.

FX TRADING RESOURCES

• Just getting started? See our beginners’ guide for FX traders
• Having trouble with your strategy? Here’s the #1 mistake that traders make
• Join a free Q&A webinar and have your trading questions answered

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter