EUR/USD is trading around 1.1400, up on the day as the market mood improves. Stocks, oil, and also Italian bonds are ticking higher after a down day on Tuesday. The crash sent the pair lower but things look calmer now. The US Dollar attracted safe-haven flows on Tuesday and is now taking a breather. Another effect of the rout was that a rate hike in the euro-zone is not fully priced in for 2019.
The European Commission is set to deliver its word on Italy after the third-largest economy economy rejected the demands to lower the budget deficit. Italian Interior Minister Matteo Salvini has reportedly offered to negotiate with Brussels, a move that also supports the pair. Brussels is set to make an announcement around 11:00 GMT and it may begin a disciplinary process.
Spreads between Italian 10-year bond yields and the benchmark German bunds are around 313 basis points at the time of writing, off the highs. A drop of the spread below 300bp can help the common currency.
Brexit impact
Brexit’s effect on EUR/USD has diminished but may return. UK PM Theresa May seems to have survived an attempt to challenge her leadership. The political stability helps the Pound and marginally affects the Euro.
Ahead of the EU Summit on Brexit on Sunday, Spain has expressed reservations about Gibraltar, the tiny piece of British land on the Iberian peninsula. The long 500-page Withdrawal Agreement will likely remain unchanged, but the political declaration, about the future relationship, may be changed or enlarged from around seven pages to 20. Brexit headlines may return to move the common currency.
US data and stock moves ahead of Thanksgiving
In the US, a big bulk of economic figures is due later in the day. Durable Goods Orders for October will be of interest. The numbers reflect investment that has been weak in recent months and has been noted by the Fed in its recent rate decision. The publication gives a first look into Q4.
