Euro, New Zealand Dollar Fall on Election Results, Moody’s Cut the Rating on Brexit 25-9-2017

Euro Slips After German Election Tests Angela Merkel’s Coalition Building Skills. The Euro has climbed up from $1.1865 neckline support where it slipped in early Asian trading on Monday after Germany’s election. Chancellor Angela Merkel won a fourth term in office on Sunday but will have to build an uneasy coalition to form a government after her conservatives haemorrhaged support in the face of a surge by the far-right. The Euro still remains stuck below the $1.2000 round number which it needs to retake to call off a head and shoulders top that has been forming.

Kiwi Took a Knock Early on Monday After Election. Political uncertainty also took a toll on the New Zealand dollar that slid down to its support at $0.7280 and is expected to be volatile today. The ruling National Party won the largest number votes in the election, but neither of the major parties won enough seats to gain a majority in parliament, leaving investors facing likely weeks of political horse-trading before a government is formed.

Moody’s Cut the Rating on Brexit, Underscoring The Economic Risks. Sterling was steady after falling on Friday when a few hours after Prime Minister Theresa May set out plans for new ties with the European Union, ratings agency Moody’s downgraded Britain’s credit rating to Aa2, saying government plans to bring down debt had been knocked off course and Brexit would weigh on the economy. In her speech, May failed to give any concrete details for how Britain might retain preferential access to Europe’s single market.

Aussie Starts to Roll Over Against Its Peers. The Australian dollar was a fraction softer on its U.S. counterpart at $0.7949 but gained on the euro after a German election also proved inconclusive. The Australian dollar also gained on the kiwi, edging up to NZ$1.0880 and off a six-week low around NZ$1.0774.

Gold Falls on Firmer Dollar. Gold prices eased early on Monday, after registering a second consecutive weekly fall last week, as the U.S. dollar firmed and as the euro edged lower on political uncertainty in Germany. Spot gold dipped 0.4 percent to $1,292.40 per ounce after falling about 1.7 percent last week in what was its second straight weekly fall.

Crude Oil Remains in Position to Extend the Rally. Despite the disappointing news from OPEC and WTI, that failed to reach a decision on extending its production cuts and may wait until January before deciding whether to extend their output curbs beyond the first quarter, markets continued to be underpinned by a bullish outlook for demand. Crude inventories rose for a third straight week, building by 4.6 million barrels. Traders had priced in a 2.8-million-barrel build.

Watch Out Today for:

07:35 am GMT: Bank of Japan Governor Kuroda Speech

15:00 pm GMT: ECB President Draghi’s Speech

By MEX Group Team

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