Italy Says "No" to Change, but U.S. Dollar Falls to Euro


USD

The U.S. Dollar is trading in mixed ranges following appreciation on Friday after strong Non-Farm Payrolls data and a busy weekend. Austria chose a new president, Italy voted on constitutional reform, and President-elect Donald Trump tweeted on taxes and foreign policy. Equity indexes are up in Europe, but not across Asia, commodity prices are chasing the oil rally, and holiday shopping has started.

This week sees central bank meetings in Canada on Tuesday and the Euro-zone on Thursday. With the build-up to the Fed hike already established, we feel the dollar will likely stay afloat as few indicators are released before the FOMC announcement next week.

EUR

The Euro originally fell to its lowest level in 20 months after the results of the awaited Italian referendum showed a rejection by the populace. However, the shared currency climbed back up and even overcame losses from the end of last week. EUR is 1.2% stronger since reaching its multi-month low prior to the North American trading session. 

Prime Minister Matteo Renzi expectedly announced his resignation as his attempts to cut on Senate powers and improve the bureaucratic mess ultimately failed. This referendum represented more of a vote against his administration than the proposals, which fell on mostly deaf ears as the people voted almost 60-40 on whether to change current constitutional balance of power.

Nevertheless, Austria’s election of Alexander Van der Bellen, a pro-EU candidate, helped ease fears that rightist groups are taking over European politics.

GBP

The UK Supreme Court will hear the government’s case against a decision to require a vote within parliament before ratifying the invocation of Article 50 to officially being separation of the UK from the European Union. We expect the GBP to stay strong if a new potential deal emerges in which the UK pays to still have access into the single market; an idea originally frowned upon, but now under serious consideration by some in the UK cabinet.