Italian banks have led the downturn in Europe

Italian banks have led the fall of European financial companies downwards as a result of growing fears of new elections in the country that could boost the position of major populist parties in the country.
The decline was driven by the shares of Banca Monte dei Paschi di Siena SpA, the volatile government-backed bank whose shares lost 7.8% of its value.
Seven of the eight worst-performing stocks in the Bloomberg Europe Banks Index were at European banks. The shares of the largest Italian bank - UniCredit SpA, lost nearly 5% of its value.
Meanwhile, the decline in Italian banking stocks has triggered the deletion of the growth of FTSE MIB Italian index since the beginning of the year.
New political choices, coupled with growing consensus opinions among populists, seriously frighten investors, according Gabriela Pinosa, head of Go-spa Consulting, a Milan-based consulting company quoted by Bloombaerg.
The victory of Euro-skeptics may lead to a gradual withdrawal of Italy from the eurozone and a potential debt write-off. And this can be extremely negative for the euro.
Interest rates on 10-year Italian bonds rose yesterday to over 2.6%, which was their highest level in nearly four years.
The fall in Italian bond prices has occurred after populist leader Mateo Salvini said it does not make much sense for Italy to remain within the EU unless the Union rewrote its rules.
The political situation seems extremely unfavorable for Italian bonds and debt holders because of the future unpredictability of vague Italian leaders.

Euro's jumping too high

There are risks of excessive euro appreciation, not due to a solid foundation. European regulators are in no hurry to change their stimulus policy.
They are worried about the sudden movements of the euro that do not correspondent to economic grounds. According to market observers, however, the ECB aim at one thing - to put pressure on the euro to fall.
The ECB does not approve of the appreciation of the euro, which makes European goods relatively more expensive on international markets and reduces their competitiveness.
The attempts of ECB heads to put pressure on euro over the past year was meaningless, as the single currency continued to rise, and the market accepted the motto "speaking is cheap."
The ECB faces new uncertainties about inflation expectations and rising oil prices. At the same time, strong economic growth is threatened by the appreciation of the euro.
The euro appreciated by 1.9% against the dollar since the beginning of the year and traded near its highest levels in three years. It fell 0.2% yesterday to levels of 1.2230.

The pound with four-week low against the dollar

The pound fell to its lowest value of nearly four weeks against the dollar after speculation about a coup against Theresa Mey from her own party after her terrible speech on Wednesday.
The British currency has fallen against the ten major currencies, with demand for dollars being exacerbated. This has triggered stops in leveraged accounts, commented market experts.
According to British newspaper Telegraph, over 30 senior members of the party of May, prepare a petition for resignation.
The pound lost 0.9% against the greenback from 1.3134 to levels approaching test support at 55-day moving average. The pound fell further with 0.5% against the euro to 89.24 pence.

Draghi: Be careful with the expensive euro

The head of the ECB, Mario Draghi, once again expressed his fears of the appreciation of the euro. Speaking on Monday, Draghi said the recent volatility in the euro exchange rate is a serious source of uncertainty and requires serious monitoring.
The euro rose from 1.05 at the beginning of the year, to about 1.19 dollars, at the moment. Further growth of the single currency against the dollar and other major currencies will seriously burden the "old continent".
Draghi told the European Parliament that the economic situation of the eurozone is stable and broad-based.
Further clarification on the ECB's future policy on incentives and record low interest rates is expected to be given at the next meeting of the Bank's Monetary Policy Committee on 26 October.
It is then that investors expect specific deadlines to end the program of incentives and the gradual normalization of interest rates in the euro area.
At the moment, the ECB buys back bonds worth 60 billion euros per month.
Speculation on ending incentives and normalizing interest rates was largely the basis for the appreciation of the single currency.
However, after the strong rise in the euro, the single currency seems to be in a correction mode, and it is now back below the threshold of 1.1900 on the first day of this week.
Draghi's comments helped further depreciation of the euro, which dropped to about $1.1850.

BoFA: Shorten the pound

The pound enjoys a serious lack of popularity among all investor groups. But sales of pounds can only begin, according to experts from the financial institution Bank of America Corp.
All types of clients - corporate, hedge funds, mutual funds, and others - have sold pounds over the past two weeks, according to a data from the financial institution.
According to Bank of America analyzes, pension and insurance funds will reduce their positions in GBP-denominated assets. They are likely to re-orient to the euro over the next few months. So, according to the US bank, there are good times for the euro and not so good for the pound.

The ECB is still worried about low inflation

The European Central Bank is still worried about the low level of inflation in the eurozone despite the substantial improvement in its condition.
From the protocols of the bank meeting held on July 20, it is clear that, according to ECB officials, market participants are too aggressive in their expectations of the recent end of the stimulus.
This was affected the value of the euro, which in the last few weeks increased significantly compared to other major currencies.
Although inflation in the eurozone is growing at a good pace, with the latter accounting for 1.3%, this is still below the 2% target of the ECB, a level that is considered healthy for the economy.

Draghi worried about the power of the euro?

The head of the ECB, Mario Draghi, is worried about the strength of the single currency against the dollar and other major currencies. Since the beginning of the year, the euro has risen by 12% against the dollar.
Thus, Draghi expressed same fears, repeatedly given by the previous ECB chief, Jean-Claude Trichet, that the strong euro could seriously hurt growth prospects for the eurozone economy.
In addition, the strong European currency puts a pole in the wheel of inflation. And inflation is one of the main threats to the growth of the eurozone economy.

Shares are cheaper, the dollar and gold are rising after Trump's threats

Global stocks fell and gold rose after US President Donald Trump said in connection with North Korea's provocations that they would be welcomed with fire.
The dollar appreciated against other major currencies as a result of increased uncertainty.
The S&P 500 index ended with minimum daily values ​​yesterday, following Trump's comments.
Trump's comments came after earlier yesterday from the capital of North Korea said they were ready to give Washington a cruel lesson of available strategic nuclear power in any US military action.
Serious increase also registered the volatility index. After the previous day VIX ended at a level below 10 points, it grew heavily yesterday, ending at its highest levels for a month.
The dollar rose by 0.5% against the euro to 1.1730 dollars for one euro.
Gold added about 1% to its value, following increased geopolitical tension, rising at trading levels of more than $1,273.

EUR/USD may fall to 1.04, and GBP/USD - to 1.20

The euro has risen to levels close to the psychological limit of 1.1500, but not all experts are convinced of further growth for the single currency.
The US dollar seems ready to shake off losses after Donald Trump's election victory, according to Amherst Pierpont.
The weak dollar may be ready to make a "U-turn" now that there are confirmations of interest rates rise.
Since the beginning of the year, the dollar has fallen by 8% against the euro and by 13% against the Mexican peso.
Analysts say, however, investors are starting to look beyond Washington for support for green money. The US currency should follow interest rates on government bonds that have risen.
In addition, the Fed is expected to begin to reduce its balance sheet, which in itself will cause a further rise in short-term interest rates and, accordingly, should make the dollar more expensive.
According to Amherst Pierpont's strategists, from now on we will see a return to the dollar-positive environment. They expect the dollar to rise by between 3 and 4% in general, the euro to move to 1.04 against the dollar and the pound to 1.20.

The dollar is cheaper after the Fed's minutes

The dollar dropped after the Fed meeting of the previous session yesterday.
It makes it clear that the members of the Monetary Policy Committee have agreed to refrain from more aggressive interest-rate action until it becomes clear that the observed slowdown in the US economy has been a temporary phenomenon.
Analysts believe the Fed's statements confirm the thesis of most market participants that we will probably see no more than two interest rises this year.
The euro appreciated against the dollar and traded at levels of 1.1236 early this morning. Later, the single currency reached the highest values ​​of about 1.1250.
The pound also rose against the dollar, again trying to get back above the psychological limit of 1.3000 against the dollar.

The dollar continued to fall in price against the backdrop of political instability in the US

On Friday, the dollar continued to depreciate against other major currencies, having updated at least six months, due to the fact that political instability in the US continues to exert powerful pressure on the US currency.
EUR / USD rose by 0.84% ​​to a new high in six months, 1.1196.
However, the dollar remained under massive pressure after this week's publications, from which it follows that US President Donald Trump asked the former director of the FBI, James Komi, to suspend the investigation into the relations with Russia by National Security Adviser Michael Flynn.
On Wednesday, the US Department of Justice appointed Robert Mueller as a special adviser who would monitor the investigation of Russia's alleged interference in the US presidential election campaign in 2016.

Euro/dollar in the near future will still close the gap

The euro/dollar is falling and is trading near the 1.088 mark. Following the meeting, the ECB left the interest rate unchanged at zero level. The decision of the bank was expected, therefore the market reaction is indirect. However, the growth of volatility is still possible, in the evening there will be a press conference of the bank, whose rhetoric will be closely evaluated. I assume that in the near future the pair will close the gap. Also in the evening there will be statistics from the US: orders for durable goods, unemployment data and unfinished sales in the real estate market.

EUR/GBP - time to sell

Traders who traded the GBP were greatly surprised when British Prime Minister Teresa May announced that early elections will be held in the United Kingdom on June 8th. For some time, the Conservative Party has overriding the opposition, according to polls, so the prospect of them remaining in power continues to be up to date, and such a development of events will not have a particular weight on the markets. In the short term, additional information is needed to keep the pound rally.
EUR/USD also rose, on a par with the British currency, in part due to a weakening dollar.
In terms of technical analysis, in the currency pair, there is a breakthrough in the key support for a reversing "head and shoulders" figure, which has been developing for 9 months. We can look for short positions at the current price, putting a stop at 0.8460 and a target 0.7886.

JPMorgan is waiting for a sharp rise in euro

The volatility of the European currency jumped to its highest level since the referendum on the withdrawal of Britain from the EU structure (Brexit), analysts say.
Investors are now facing the danger of a populist victory in the presidential election in France, they add.
Nomura analysts comment that significant cash flows are aimed at hedging currency risk, and most likely this will affect the euro and increase trading volumes on election days.
The French presidential elections will take place in two rounds: on April 23 and May 7. Polls indicate that voters in the second round are likely to vote for National Front party leader Marin Le Pen, who stands for leaving the country out of the Eurozone.
However, the newspaper notes that investors are concerned about fluctuations in the results of opinion polls.
According to JPMorgan analysts, Le Pen's win will be well accepted by market participants. So, the growth of the euro against the dollar to 1.15 dollars per euro is not excluded, compared to the current levels of about 1.07 dollars per euro, experts say.

Deutsche Bank: The defeat of Marine Le Pen could send EUR/USD to 1.08

In case of victory of Emmanuel Macron on the presidential elections in France (the first round is on April 23, and the second - on May 7), EUR/USD could rise to 1.08 dollars, the bank analysts said. Furthermore, they believe that:
- Low volatility talk about market confidence in the fact that Le Pen would win;
- despite recent bellicose statements of the administration of Donald Trump on currency manipulators, neither the US nor China want excessive weakening of the yuan;
- breakthrough of US 10-year bonds below 2.25% could spark a new wave of liquidation of short positions;
- in general, the yield on US bonds look quite low relative to the general economic picture and it seems the market underestimated the warlike attitude of the Federal Reserve.

ABN Amro: ECB will start to reduce incentives in January

While the sources of the ECB signaled that the market has taken a sharp change in the rhetoric of central bank, ABN Amro analysts do not change their view of readiness in the near future the process of reducing the stimulus measures to begin.
Furthermore, ABN Amro adjusted its forecast and now the baseline scenario assumes the end of the program for purchases of assets.
Strategists believe that in January 2018 the ECB will start to decrease the monthly volume of purchases by 10 euro billion per month, resulting in quantitative easing program will be completed by June, then the ECB will start to normalize interest rates on deposits.
At ABN Amro believe that the first step in this direction will be held in September next year. ABN Amro still retains its forecast for EUR/USD, made in early March:
    Q2 2017 - 1.05
    Q3 2017 - 1.05
    Q4 2017 - 1.10
    1Q 2018 - 1.15
    2018 - 1.20

Dollar up

On Thursday, the dollar gained in price against the basket of other major currencies against the background of the weakening of the euro.
The US dollar index, which shows the strength of the dollar relative to a basket weighted by trade from the six leading currencies, increased by 0.21% to 100.00.
On Monday, amid the failure of Donald Trump's bill on medical reform, the dollar index fell to 98.67, the lowest level in four and a half months.
The withdrawal of the bill increased fears in Trump's ability to realize his economic policy, including tax cuts and increased spending on infrastructure projects.
The EUR/USD slipped by 0.27% to 1,0784, retreating from the high of 1.0905, fixed on Monday, for four and a half months.
The euro fell as a result of yesterday's trading session after Reuters reported that officials of the ECB are wary of making any changes to the statement on monetary policy in April. The fact is that the previous ECB statement as a result of the March 9 meeting was misinterpreted by the markets.
In a previous statement, ECB officials recognized the improvement in the eurozone economy, which led to increased expectations about a reduction in the financial incentive program and a possible increase in the interest rate.
President of the Federal Reserve Bank of Chicago, Charles Evans, said on Wednesday that he supports a further increase in the interest rate this year. This increased demand for the dollar.
The dollar slightly changed against the yen: USD/JPY was at the level of 111.03, recouping further from the minimum of four weeks 110.10, reached on Monday.

The pound declined after the Brexit start

The pound fell against the dollar, after on Wednesday the British Prime Minister Teresa Mei formally launched the procedure for Britain's divorse with the European Union and began a two-year period of negotiations on the terms of Brexit, which will end in late March 2019. The pair GBP/USD fell by 0.12% to 1.2418. At the same time, the pound went up against the euro: the pair EUR/GBP fell by 0.14% to 0.8644.
On Wednesday the British Prime Minister Teresa May signed a letter that will officially launch Brexit. A letter with an official notification of Britain's invoke the 50th article of the Lisbon Treaty with the aim of exit from the European Union was delivered to the chairman of the European Council Donald Tusk.

Barclays is waiting for recovery of the euro against the franc

Currency strategists at Barclays note that investor sentiment towards the euro in recent times have changed for the better and believe that sustainable economic recovery will strengthen the market, which is of the opinion that the ECB is close enough to start removing stimulus measures, analysts said.
In the bank believe that correction of forecasts of the European central bank may give investors reason to expect an increase in deposit interest rates next year.
In addition, in the coming months, support for the single European currency can eliminate the risk premium associated with the uncertainty of the elections in France, analysts say.
At Barclays noted that such a prospect gives cause for moderate optimism in EUR/CHF - in the are bank waiting for the pair in the second quarter to come back to 1.09 and will continue to recover moderately (to 1.10 and 1.11 respectively) in the third and fourth quarters.

Credit Agricole: The dollar was the victim of unfulfilled hopes

Currency strategists at Credit Agricole recognize the risk of an upward adjustment of EUR/USD in the short term, but expressed doubts about the sustainability of such a movement and its scope.
At the bank believe that the dollar was the victim of the "buy on rumor, sell on facts" and ahead of the FOMC interest rate futures almost guaranteed increase in interest rates and accompanying statement could not warm up expectations for more aggressive tightening policy.
The liquidation of long positions by speculators disappointed in the near future will finish and market participants will remember that the dollar is the third-yield currency of the G10 as maintaining short positions in the currency is not expensive, analysts say.
The situation of the US economy remains highly constructive and Credit Agricole believe that investors underestimate the scale of the rise in interest rates in 2018 and 2019, as suggested by official forecasts of Fed. In addition, exchange rates do not reflect fully the positive for the dollar changes in the differential rate.
Credit Agricole is sticking to its forecast for EUR/USD in the second quarter at 1,04 and 1,05 in the third, hoping that the pair will recover to 1.08 in the fourth and 1.11 in the first quarter of 2018.