Analysts at ANZ New Zealand Bank Limited explained they key themes for currencies today.
Key Quotes:
“The UK appears to be inching closer to achieving a Brexit deal. A draft deal has been reached between negotiators, including agreement on an Irish border backstop, which has been the key sticking point in negotiations.
A UK Cabinet meeting is scheduled for Wednesday afternoon (3am NZT) to discuss the draft.
Although Prime Minister May still faces a significant challenge getting Brexit through Parliament, markets are becoming a little more optimistic that a deal will be achieved, with GBP making gains. If there is a Brexit deal, there will be increased conviction from the Bank of England that rate hikes will be necessary. Yields on UK 10-year gilts rose 7bps.”
“Italian bond yields continue to increase on concern that the Government will resist changing its budget deficit target. Coalition leaders and the Finance Minister are meeting tonight to agree on a response to the EU regarding the budget plan. Defiant words can be expected, although minor budget tweaks are possible, including an offer of more privatisations. Italy is expected to stick to its 2.4% of GDP deficit target, which the EU has rejected.”
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