Generally speaking, it was a quiet overnight session as traders look forward to a light calendar in the days ahead – or at least compared to the last two weeks.
There was of course another “van attack†in the UK (“van attack†has become “a thing†now). Additionally, Monday marks the start of Brexit negotiations. “This is a sad, sad day,†ECB Governing Council member Jan Smets said in a Bloomberg Television interview in Brussels. “I have been witnessing a history of the European Union and European monetary union for decades now,†he added. “We’ve always have been the process of integration, convergence and now we will negotiate about the disintegrationâ€
So far, sterling isn’t under any notable pressure. Volatility has gotten a boost, with pound vols overperforming across the majors.
If there’s an overnight FX story, it’s probably the Aussie, which got hit after Moody’s cut Australia’s Big 4 banks, citing housing risks. Here are the notable bullet points:
- Elevated risks within the household sector heighten the sensitivity of Australian banks’ credit profiles to an adverse shock, notwithstanding improvements in capital and liquidity in recent years, Moody’s Investors Service says in statement.
- While Moody’s doesn’t anticipate a sharp housing downturn as a core scenario, the tail risk represented by increased household sector indebtedness becomes a material consideration in the context of the very high ratings assigned to Australian banks
- Whilst capital adequacy is likely to strengthen further — as a result of regulatory action — and macro prudential measures will alleviate a further build-up of risks, the very high level of household sector indebtedness will take a considerable period of time to unwind
- Resilience of household balance sheets and, consequently, bank portfolios to a serious economic downturn has not been tested at these levels of private sector indebtedness
