France’s political unrest continues

France has faced continued riots over the weekend, with tensions between protestors and police intensifying. The ongoing tensions have piled onto France’s ongoing woes, with the tensions potentially spilling over into the FX markets.

MORNING OVERVIEW

France has faced heavy riots over the weekend, with authorities struggling to contain fires and looting on Saturday, as clashes between police and rioters took place in cities across the country. The ongoing issues present another layer of pressure on the French government, which is struggling to pass their fiscal agenda. In turn, markets may be worried about the risk of contagion.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — France plunges into civil unrest

This weekend, France saw protests which resulted in clashes between rioters and police on the streets of France. According to Bloomberg, roughly 500,000 protestors gathered over the weekend, resulting in some of the worst street violence seen in the past few years. The riots this weekend took on a political element as France’s Presidential elections are set to occur in six months; thus, political parties may be attempting to take advantage of the situation, which could result in opposition in parliament for the Governments fiscal ambitions. Overall, the tensions in France could spill over into the financial markets, which in turn could weigh on the EUR.

Market implication (EUR): Bearish

02 — The Chinese economy continues to expand

China’s GDP rate for Q3 was released earlier on today during the Asian trading session. Economists had predicted the GDP rate to come in at 4.4% which would mark an improvement from the prior quarters rate of 4.3%, yet the actual rate came in at 4.5% marking economic growth at a greater rate than what was expected. In turn the GDP rate may have provided the CNH with support, whilst also possibly aiding the Aussie considering the close economic ties between the two nations.

Market implication (CNH): Bullish

03 — Canada’s CPI rates due out today

Canada’s CPI rates for September are set to be released today. The inflation print for September is set to provide insight into the inflation narrative within the Canadian economy. The prior rate currently stands at 2.4% and 3% on a core and headline level, respectively. In turn an acceleration of inflationary pressures in the Canadian economy could increase calls for the BoC to be more restrictive in its monetary policy path. In our view, considering how global energy prices have remained elevated, inflation could tick up in the Canadian economy which could increase calls for a rate hike from the bank. Overall, an uptick in inflation could provide support for the Loonie and vice versa.

Market implication (CAD) : N/A  

WHAT MATTERS TODAY

Canada’s headline CPI rate

Time GMT+2): 15:30

Expected: N/A
Previous: 2.4%

Potential market reaction:
N/A

ASSET FOCUS

[OIL , Commodities]

Oil prices for the day appear to be moving in a downwards fashion for today. Overall, we would opt for a bullish outlook for the commodity’s price and supporting our case is the RSI indicator below our chart which currently registers a figure close to 60 implying a bullish market sentiment, as well as our MACD indicator. For our bullish outlook to be maintained we would require a break above our 99.30 (R1) resistance level, with the next possible target for the bulls being our 105.60 (R2) resistance line. On the other hand, for a sideways bias we would require the commodity’s price to remain confined between our 91.25 (S1) support level and our 99.30 (R1) resistance line. Lastly, for a bearish outlook, we would require a break below our 91.25 (S1) support level with the next possible target for the bears being the 84.75 (S2) support line.

KEY LEVELS

• Resistance (R1): 99.30
• Resistance (R2): 105.60
• Support (S1): 91.25
• Support (S2): 84.75
• Technical View: Bullish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bearish for EUR

Our base case:
We wouldn’t be surprised to see political instability in France continuing, as the situation continues to develop following the riots in France over the weekend. In turn the instability and concern may spill over into the FX markets, which may influence the EUR.  

What would change our view:
Easing tensions in France.

RISKS TO THE VIEW

Contagion effect resulting in France’s fiscal ambitions being pushed back

France is currently facing a variety of issues, including concerns over its economy, which may weigh on the EUR in the future.

TODAY’S WATCHLIST

01 Canada’s CPI rates