05/12/16 - Euro Slumps as Italy Votes No, Renzi Resigns

EUR

 

The Euro fell to a 20 month low in early trade this morning  after Italian Prime Minister Matteo Renzi resigned following a crushing defeat on constitutional reform that could destabilize the country's shaky banking system.

It was a not an unexpected defeat but it was nevertheless a humiliating one, with 59.1% of Italians voting against the proposed reforms, which would have made sweeping changes to Italy’s constitution and parliamentary system.

With Matteo Renzis resignation the country is set for further political instability, a caretaker government could be employed or a snap election is  called. Currently the most likely scenario is a caretaker government is put in place to see Italy through the 2017 parliamentary budget. 

Earlier in the weekend the Euro was provided a boost after Austria rejected anti- immigration far right leader Norbert Hofer in favour of left leaning  Candidate Alexander Vander Bellen for president. This could be seen as a sign of how well populist candidates may fare in other up-coming elections across Europe in 2017.

 

USD

 

On Friday U.S. employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6 percent, making it almost certain that the Federal Reserve will raise interest rates later this month.

Nonfarm payrolls increased by 178,000 jobs last month after increasing by 142,000 in October. The solid employment gains likely reflect growing confidence in the economy, which has been marked by rising consumer spending and inflation.

The unemployment rate hit its lowest level since August 2007, because more people found work as well as dropped out of the labour force.  A pullback in wage growth after two straight months of solid increases, however, put a dent in the otherwise upbeat employment report. Average hourly earnings fell  0.1 percent, after moving up 0.4 percent in October. Trump's plan to increase infrastructure spending and slash taxes could encourage companies to boost hiring and spur an even faster pace of economic growth over the coming years

Key Announcements

All Day – GBP: UK Supreme Court Hears Government-Parliament Brexit Appeal

09:30 – GBP: Markit Services PMI (Nov) expected to fall to 54.2 to 54.5

14.45 – USD: Markit Services PMI (Nov) expected to improve to 54.9 from 54.7