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    IronFX Daily Commentary | Portugal’s left-wing parties ousts the minority government | 11/11/2015

    11.11.2015, 10am

    • Portugal’s left-wing parties ousts the minority government Portugal’s minority government collapsed on Tuesday, as left-wing parties ousted the ruling center-right party just six weeks after the country’s inconclusive elections. It is now up to the head of state to decide who should lead the next government as Portuguese law prohibits elections for six months. The prospect of a government that supports an end to austerity and increase to incomes, leads investors to take aim against the Lisbon’s stock market, which fell more than 4% in two days. A key point of concern in the markets will be Portugal’s credit rating review end of this week, by the last one of the four agencies that still rank the country as investment grade. A one-notch downgrade would send Portuguese debt into junk territory. As a result, it will not be qualified for the ECB’s expanded asset purchase program. What’s more, this could trigger a turmoil in the European stock markets and provide an excuse for some profit-taking.

    • Even though expectations of more ECB easing coupled with the high probability of a Fed rate hike in December are the main forces behind EUR/USD moves, political uncertainty is unlikely provide support to the common currency and could keep it under selling pressure.

    • Chinese data shows no significant improvement China released several indicators during Asian trading session that showed no significant improvement from the previous month. Retail sales were slightly higher in October, while the fixed asset investment and industrial production declined in pace, despite the plethora of measures the government has been taking to shore up the economy. This underscores the limited impact that the measures so far have had and the difficulties the country will have in boosting growth. We believe that fiscal policy, along with the loose monetary policy is needed to stabilize slowdown of the economy.

    • Today’s highlights: The European day is relatively light as we have holidays in Canada and the US. The spotlight will be the UK employment report for September. The forecast is for the unemployment rate to have remained unchanged at 5.4%, while average weekly earnings are expected to have accelerated to 3.2% yoy from 3.0% yoy the previous month. Further improvement in the UK job market is likely to support Cable, which could continue recovering some of its losses caused by the BoE’s dovish stance last Thursday and the strong US employment report on Friday.

    • As for the speakers, ECB Vice-President Vitor Constancio speaks. ECB President Mario Draghi and BoE Gov. Mark Carney speak at a forum held by the Bank of England.


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