3rd October 2018 - EURUSD has been just shy to overtake 1.16 from the first try

Walid Salah Eldin

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EURUSD could spike up to 1.1593 during the Asian session, after Corriere della sera newspaper revealed news telling that the Italian governmental plan to adopt 2.4% deficit of 2019 GDP and 2.2% for 2020, before easing this rate down to be 2% in 2021 by deploying more spending cuts.

These rates are lower than the 2.4% deficit to GDP ratio which has been announced last Thursday to cause worries about new debt crisis in EU.


The proposals of the new Italian populist government could weigh down on the single currency to be trading in a closer place to 1.15 yesterday.

The Italian Govt 10yr bond yield went up also to reach 3.45% yesterday, after it has been near 2.80% last Wednesday, before these proposals which have been followed by issued comments from Italian officials saying that most of the Italian problems would be resolved, if it is to be out EU.


While The Italian Fin Minister Tria said that Italy is targeting by this financial expansion 1.6% GDP growth in 2019 and 1.7% in 2020.

In the beginning, Tria was asking for adopting deficit at 1.6% of 2019 GDP, before his populist government shocked him by offering proposals reached 2.6% during 2019 budget discussions.


The populist government could spark worries about its Credit rating and also about its relationship with EU which can to make a plan to rescue Italy which has larger economy more than the double of Greece plus North Ireland and Portugal.

Italy surely knows that but it eager to get higher use of the current global economic recovery which can help it to spur reflation to have higher growth rate can be hardly reached in other times of the global economic cycle. It is not the same hard time following credit crisis, when The debt crisis has been sparked by Greece.

I see that It has the right to take that risk right now and its goal can be reached and can also get the acceptance of EU which is living in stronger economic recovery stance can gain higher momentum with rising of the inflation forces inside of it without expected rate rising before next summer.


God willing, the market will waiting today for the release of Sep service figure of EU and US which will be waiting too for Sep ADP report which is expected to show adding of 185k, before the release of US labor report of September by the end of this week which is expected to show 188k added jobs out of the farming sector and decreasing of the unemployment to 3.8% from 3.9% in August.

The US wages inflationary pressure will be closely watched, while Sep earning per hour is expected to increase by 3% y/y, after rising by 2.9% in August.

Fed Chairman Powell said yesterday that he welcomes wages increases. he indicated also that he has confidence in that the low unemployment will not spark the inflation rising that could force him to be in rush to raise rates.


Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
 

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