Summary:

• The two largest Italian parties have reportedly reached a deal to end a political deadlock
• US threatens to impose sanctions on European companies doing business with Iran
• Canadian PM Tredeau remains optimistic a NAFTA deal can be struck soon

There was no single story influencing financial markets over the weekend, but we got a few noteworthy reports being worth inspecting. At the beginning let us notice the Asian session brought just April NZ services PMI coming in at 55.9 making a noticeable decrease from revised down 58.6 nevertheless it did not prove to be any market mover immediately though the NZ dollar loses the most within the G10 basket in the morning. Looking elsewhere Asian stocks have managed to gain across the board with the Hang Seng leading the gains and adding as much as 1.6% at the time of writing.

What are the most important stories from the weekend? The first one concerns Italian politics where parties have been struggling to forge any government over the recent 10 weeks or so. However, it looks that the two major parties – 5Star Movement and League – have made strides setting the stage for breaking the Italian stand-off. Both were to reach an agreement on Sunday, and now they are going to consult President Sergio Mattarella on Monday. Do notice that negotiations with regard to members of a government cabinet are still under way. The EUR has barely responded to those revelations so far underlying Italian issues in forming a government are not capturing investors’ attention too much.

The shared currency stayed above its local support line at 1.1930 last week, and therefore some could currently count on a healthier bounce to the upside. A comeback below this line would take the price down again even toward 1.1750. Source: xStation5

The US decided to withdraw from the Iran nuke accord last week, and even as other countries did not follow some risks concerning protectionism already surfaced. Namely, White House National Security Adviser John Bolton said over the weekend the US could impose sanctions on the European Union should EU-based companies continue doing business with Iran. Even as there were not official threats, but rather just opinions from John Bolton, there is no doubt that President Donald Trump is likely to share this view. If so, it would lead to an intensification of sanctions exacerbating relations between the two regions. On the flip side, if the EU halts its businesses with Iran, it could substantially lower imports of crude oil offering another boost to the oil market.

WTI oil prices drew a sinister candlestick on a daily time frame which could encourage bulls to dump at least some of their positions. Source: xStation5

The last but not least, the NAFTA negotiations are still under way, and they are some hopes a deal may be agreed by Thursday, according to US lawmakers who want it in order to give it enough time to get through the Congress. Meanwhile, reassuring reports are coming from Canadian PM Justin Trudeau who said that remains optimistic an agreement can be reached soon. The Canadian dollar or the Mexican peso are slightly up in early trading, but it stems rather from relative underperformance of the US dollar, not directly from the mentioned comments.