Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 16 May 2018 at 10:16 GMT

Macro Digest: Italian woes, USD strength and a North Korean rethink

Chief Economist & CIO / Saxo Bank
By Steen Jakobsen

We're living in dangerous times where the hazards just seem to be increasing, from a possible Italian government comprising the populist and anti-EU blocs, to ever-increasing USD and yield strength to a North Korean rethink on Kim Jong Un's pow-wow with The Donald. Here's how I'm responding:

Long dollar vs. EUR, DXY, JPY, XAU for now…

Break higher in 2-year and 10-year US yield
Break of 12 month SMA in DXY, EURUSD, USDJPY, XAU
Increased EUR risk on the back of Italian polictics
Geopolitical escalation can work both ways but most likely for risk off…
Stop loss: 100 basis above EUR here – 1.1930 vs. 1.1835 now…..XAU above 1330/35.

Italy is now a big risk because of a potential new government

 A document leaked overnight to the Italian edition of the Huffington Post that purports to be a draft programme for government between the 5-Star and League, has, according to Reuters, unnerved markets. The document includes, inter alia, dropping Russia sanctions, a mechanism to leave the euro, changes to EU treaties and stability rules, and asking the ECB to cancel €250bn Italy's debt.  

Obviously, it is a draft and it has been leaked for a reason.. but it is still worrying. 

Might the dollar rally soon ebb out?

A technical break of a key long-term indicator, (the 12-month simple moving average), indicates the final leg of this US dollar strength correction…… 

Meanwhile, US fixed income broke big levels yesterday and the focus on Fed policy and the US deficit increases… 
treasury spread
Finally, overnight, KCNA, the North Korean Central News Agency, released a statement from the dictatorship's ministry of foreign affairs, saying  North Korea says may reconsider its summit with the United States. Looks like they didn't think much of secretary of state Mike Pompeo....


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. 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 ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the 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 under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail