Euro rises, oil plunges – caution warranted

Clare MacCarthy

Senior Editor, Saxo Bank
Clare MacCarthy first joined Saxo Bank in 2012 to work as a senior editor on TradingFloor.com. Prior to this, she worked as a Denmark-based foreign correspondent for The Economist and the Financial Times and also served as Copenhagen bureau chief for Dow Jones Newswires.

The weekend's big story was Italy's descent into political chaos after the country's president blocked the appointment of a eurosceptic candidate for finance minister and the populist/anti-establishment pairing working to form a government abandoned their attempt.

"The big question now is whether we'll get an election or a technocrat government. What is certain is that this isn't good for the market and it's not good for Italian BTBs and corporate bonds," says Althea Spinozzi, from Saxo’s bond trading desk.

However, the possibility of a technocrat government rather than a deeply anti-EU one saw the euro break higher with the common currency bounding up from a six-month low early Monday. But one should be cautious here, says John J Hardy, Saxo’s head of forex strategy. "This situation is far from over and I'd be wary of going with the relief rally for now," he says, adding that headline risks are probable throughout the week.

The other big story in markets today is a dramatic reversal of fortune for crude oil which saw Brent take a deep dive as hedge funds accelerated their selling on the outlook to Opec and Russia relaxing their production cuts. The key level of $71.40 is now back in play, barring any modifications by Opec or Russia to their comments last week about loosening their restrictions on output.

You can access both of our platforms from a single Saxo account.

Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)