EU MID SESSION UPDATE: Global politics provides an air of caution to begin the week

Equities

A tepid start for European stock with a sense of anxiety among investors following the result of the German election and a surprise rise in support for the far-right AFD party, subsequently, Chancellor Merkel has been left with a less stable position. Notable underperformers have been financial and commodity related names.

FX

EUR suffered following the weekend results despite Chancellor Merkel being set for a fourth term. Merkel’s CDU/CSU performed weaker than expected and will now need to undertake coalition discussions, likely set to attempt to form a ‘Jamaica’ Coalition with the FDP and Green Parties, with FDP being an initial hurdle.

EUR/USD rejected 1.20 on Friday, and struggled as Asian trade began, trading through 1.19, now consolidating just above these levels.

EUR/GBP saw similar price action, finding support ahead of September’s lows. A break through the 0.8774 area could see trade once again in the start of 2017’s trading range.

NZD was also heavy following their election results, and in line with Germany, despite a victory for the National Party, a majority was also not secured. This places the next government at the hands of New Zealand First Party’s leader and effective ‘kingmaker’ Winston Peters, who is all too familiar with this obligation having supported both the National Party and main opposition Labour in past governments.

NZD/USD find some support following initial selling pressure, support at September 18th’s low held, with some buying evident around these levels.

AUD/NZD held just through 1.0800, yet continuing to show a downward trend following the stacked offers seen around 1.1150 through September.

Fixed Income

A slight tick lower in German yields have supported bunds this morning with the yield modestly flatter. A soft start for peripherals as spreads widen against their German counterpart with Spain and Italy wider by 1.6bps and 1bps respectively.

Commodities

Commodities were mostly range-bound which kept WTI subdued, while copper was unchanged amid a subdued risk tone. Elsewhere, gold (-0.3%) was pressured from early trade due to a firmer greenback, after the currency benefitted from political uncertainty weighing on a couple of its major counterparts post-elections.  

 

25 Sep 2017 - 09:47- - Source: RANsquawk

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