07/03/2018 - Korean Talks Move Markets


Sterling rebounded on Tuesday, pulling off the day’s lows on a broad-based revival of risk appetite on news that South Korea would hold its first summit in more than a decade with North Korea.

The development on the tense Korean peninsula sent the struggling dollar down half a percent against a basket of its rivals to the day’s lows, buoyed European stocks and U.S. stock futures higher, and nudged bond yields upwards.

Currency markets await draft guidelines today on what the European Union would like to see in a trade agreement with Britain after the country leaves the bloc in 2019.

Prime Minister Theresa May’s Brexit speech on Friday sought to convince the EU that it is in its interests to show flexibility in deciding the shape of the relationship with Britain after its exit, but markets did not perceive sufficient signs of progress in the talks.


The dollar skidded on Tuesday and riskier currencies such as the Australian dollar soared, as appetite for risk was rekindled by a historic agreement between North and South Korea on direct talks.

North and South Korea, still technically at war but enjoying easing tension since the Winter Olympics in the South last month, will hold their first summit in more than a decade next month, South Korea said on Tuesday. It also said North Korea is willing to hold talks with the United States on denuclearisation and will suspend nuclear tests while those talks are under way.

The dollar, which has been sought at times of risk aversion in recent months, tumbled on the news, trading down 0.6 percent on the day against a basket of major currencies.


The failure of Italy’s neighbours to help out more with a huge influx of migrants boosted the anti-immigrant vote and contributed to the resounding defeat of its ruling party in last weekend’s election, European officials acknowledge.

“Italy has, it’s undeniable, suffered for months and months under the pressure of migration. This very strong migration pressure is a context we should keep in mind,” said French President Emmanuel Macron.

About 170,000 refugees and migrants crossed the Mediterranean to Italy in 2014, according to U.N. figures. In the next two years arrivals were 154,000 and 181,500, before falling to 119,000 in 2017.

Italy’s centre-left Democratic Party won less than a fifth of the votes, losing to anti-establishment and right-wing parties that campaigned hard against immigration. Under pressure from eurosceptic rivals, mainstream EU politicians read it as meaning they must take a hard line on immigration or risk losing power.

Key Announcements

13.15 – USD – ADP Non Farm Employment Change; Forecast at 194k against previous of 234k