EURUSD Drops as Italy Risks Snap Elections, USDCAD Spikes - US Market Open
EUR: A recovery in the US Dollar after Fed’s Williams faux pas had been clarified, has weighed on the Euro, which is once again back towards the low 1.12s. Overnight, comments from Fed’s Williams had led to a surge in bets for a 50bps rate cut, however, this had later been clarified by a spokesperson, noting that this was not in relation to the upcoming meeting, thus sparking a pullback in 50bps cut expectations. Keep in mind as well that the most dovish FOMC member, Bullard, had previously stated that a 50bps cut would be somewhat overdone.
Aside from the communication error at the Fed, Italian risks are once again plaguing the market with the FTSE MIB notably underperforming as tensions rise between the League and 5 Star Party. Yesterday, both parties had stated that the coalition were at risk of breaking, consequently raising the prospect of a snap election. Bund-BTP spreads are modestly wider this morning, keeping the Euro on the backfoot, most notably against the Swiss Franc.
CAD: The Canadian Dollar fell to fresh weekly lows following soft retail sales (-0.1% vs. Exp. 0.3%), which had also coincided with soft oil prices. However, the Loonie has since pulled off worse levels amid offers at 1.31.
Source: DailyFX, Thomson Reuters
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--- Written by Justin McQueen, Market Analyst
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