Waking up to another one

Monday morning’s focus had all been on the Italian referendum which saw the ‘No’ camp taking over, finally in line with the polls pre-referendum.

Italian Flag
Source: Bloomberg

For Asia, the impact of the referendum had immediately been transmitted through the currency channel as the EUR plunged against the USD.

EUR/USD was seen down approximately 150 pips following the announcement that early results had overwhelmingly pointed to a rejection of the reform proposals, in line with expectations.

Prices touched a fresh low since March 2015 at $1.0506 before retracing some losses to $1.0570 levels when last checked (00:00GMT). This had bumped up the USD index, which has the largest exposure to EUR fluctuations, up to 101.62, before prices slipped to trade just above 101.20. The dip following the release of last Friday’s November non-farm payrolls (NFP) data had all been obliviated in the process.

The corresponding impact on Asian currencies had been of a smaller extent with USD/JPY up above $113.50, though still a distance from last Thursday’s high of $114.83. This had however done little to boost sentiment for the Nikkei which opened down 0.41% after shedding 0.47% last Friday on the back of a strengthening JPY. This is even as the November Nikkei 225 services PMI showed substantial improvements from the previous release.

As shown this morning by KOSPI, an early mover, the negative sentiment following the elections coupled with weak US leads could keep Asian markets depressed at the start of the week. Our opening call however sees the local Singapore market escaping this gloom.  

Meanwhile for commodities, gold prices shot up to a high of $1188.18 before returning trade on either side of $1180 when last checked (00:30GMT). The safe haven saw an early rush on the announcement of the Italian referendum results before the market hastily took profit on the gain. Nevertheless, the Italian referendum results may just be the tip of the iceberg as concerns over the stability of the Italian banking sector and the structural integrity of the European Union hence sets in.

Separately, as the markets digested the news of Italian Prime Minister Matteo Renzi’s resignation following the poll results, New Zealand Prime Minister John Key had also issued a statement that he will be stepping down. NZD/USD experienced a double hit from both the USD strength and the resignation of the PM, down to sub-$0.7100 levels into Monday morning.

The day ahead will have the markets watching for Japan’s November consumer confidence, US November services PMI and several Fed speakers providing their outlook on the economy.

Friday: S&P 500 +0.04%; DJIA -0.11%; DAX -0.20%; FTSE -0.33%

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