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1 Oct 2013
European open: US and Europe continue fight to the bottom
FXstreet.com (London) - Today’s European session is going to carry on on the same themes as opened the week – the US debt ceiling and Eurozone political instability.
The difference of course being that the US has now surpassed its midnight deadline sending the US government into partial shutdown. Today up to 800,000 non-essential government workers will be sent home. Even at the eleventh hour, there were market signals that it was pricing a last minute compromise agreement between Republicans and Democrats, with the S&P showing upwards momentum right until both parties threw in the towel.
While not strongly fundamentally negative for the dollar, the shutdown will weigh on US confidence. Past shutdowns have shown moderate downside dollar pressure, with gains on any resolution.
The dollar came under selling pressure across the board in the run up to the shutdown, with sterling breaking 9-month highs to USD1.6262 and continuing to climb this morning.
EUR/USD climbed to a USD1.3587 high, however any further gains could be capped by continuing Eurozone political instability after Silvio Berlusconi withdrew his party from the Italian parliament, along with his ministers serving in the cabinet, pulling the rug from under the governing coalition.
European uncertainty is compounded by the continuing negotiations in Germany as Angela Merkel seeks to form a coalition government following her victory in the general election last weekend.
Italian 10-year government bond yields are at 4.58 percent, up by 0.15.
Gold climbed to USD1,338.7/oz, but has sold off to USD1,332.2/oz.
In China, weaker than expected official manufacturing PMI echoed the Markit figures, rising just 0.1pts to 51.1 – further indication of fragile Chinese growth.
The difference of course being that the US has now surpassed its midnight deadline sending the US government into partial shutdown. Today up to 800,000 non-essential government workers will be sent home. Even at the eleventh hour, there were market signals that it was pricing a last minute compromise agreement between Republicans and Democrats, with the S&P showing upwards momentum right until both parties threw in the towel.
While not strongly fundamentally negative for the dollar, the shutdown will weigh on US confidence. Past shutdowns have shown moderate downside dollar pressure, with gains on any resolution.
The dollar came under selling pressure across the board in the run up to the shutdown, with sterling breaking 9-month highs to USD1.6262 and continuing to climb this morning.
EUR/USD climbed to a USD1.3587 high, however any further gains could be capped by continuing Eurozone political instability after Silvio Berlusconi withdrew his party from the Italian parliament, along with his ministers serving in the cabinet, pulling the rug from under the governing coalition.
European uncertainty is compounded by the continuing negotiations in Germany as Angela Merkel seeks to form a coalition government following her victory in the general election last weekend.
Italian 10-year government bond yields are at 4.58 percent, up by 0.15.
Gold climbed to USD1,338.7/oz, but has sold off to USD1,332.2/oz.
In China, weaker than expected official manufacturing PMI echoed the Markit figures, rising just 0.1pts to 51.1 – further indication of fragile Chinese growth.