Euro May Fall with Commodity Currencies on Italian, French Data
TALKING POINTS – AUSTRALIAN DOLLAR, YEN, ITALY, FRANCE, S&P 500
- Yen up, Aussie Dollar down as RBA outlook cut stokes global slowdown fears
- Kiwi Dollar finds a lifeline in corrective flows following yesterday’s collapse
- Italian, French industrial production data might amplify risk-off market mood
The Australian Dollar tumbled as the RBA slashed economic growth and inflation forecasts, sapping what little was left of interest rate hike prospects. The prevailing risk-off mood compounded selling pressure as Asia Pacific bourses picked up on a negative lead from Wall Street.
The Canadian Dollar likewise fell with regional shares but the New Zealand Dollar managed to hold up, buoyed by corrective flows following yesterday’s outsized plunge in the wake of disappointing employment data. The perennially anti-risk Japanese Yen enjoyed a familiar boost.
ITALIAN, FRENCH DATA MAY AMPLIFY RISK AVERSION
Bellwether S&P 500 futures are pointing ominously lower, hinting more of the same is likely as European and American markets join the fray. Disappointing results on incoming industrial production data from Italy and France might compound the downbeat mood. The Euro may also suffer.
Economic news-flow out of the Eurozone has steadily deteriorated relative to consensus forecasts since September. More of the same might stoke worries about the inability of the second- and third-largest economies in the currency bloc to meet EU budget deficit targets.
Brussels insisted on fiscal restraint in Rome last year, pushing the M5S/Lega coalition to curb its appetite for expansionary policy. Prospects of a similar face-off with Paris – seen as something of a pro-EU beacon amid the recent eurosceptic ascendancy – might reboot political instability concerns.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.