Danske Markets | Jul 08, 2019 01:54AM ET
The Turkish lira opened 2.3% weaker against the EUR (currently at 6.4612) this morning following Erdogan's decisions to dismiss central bank governor, Murat Cetinkaya, and instead naming central bank deputy Murat Ulysal as his successor. According to a government official, Erdogan continued to push his conviction that higher interest rates fuel inflation in a closed-door meeting, after the decision had become known. Although the lira has performed the last two months, short lira positions have remained high.
The general elections in Greece yesterday showed overwhelming support for the centre-right party New Democracy led by Kyriakos Mitsotakis, who is set to become the new prime minister. Preliminary results show that New Democracy got 40% of the votes, while Alexis Tsipras' ruling Syriza party is set to get 32%. The result also showed waning support for right wing Golden Dawn, which is (so far) not set to pass the 3% threshold needed to enter parliament. Golden Dawn became the third largest party in Greece's last elections obtaining 7% of the vote. The Greek election system sees the largest party obtaining a further 50 mandates, which would give New Democracy an absolute majority. Although Mr. Mitsotakis has promised tax cuts and larger investments, the economic policy will most likely not differ much from the existing one, given the deal agreed upon between Tsipras and the country's creditors. Greece's government debt has performed immensely this year - the current 10Y government bond was introduced at a yield of 4% in early March and is now trading at 2.1%.
Stocks in Asia markets are down this morning with the Hang Seng down 1.6% and Nikkei down 1%. The strong US jobs report on Friday saw market participants lower the implied rate cut at the July meeting to 'just' 25bp, after the probability of a 50bp cut had previously reached 24%.
Oil is little changed this morning after the UK and the EU expressed concern during the weekend over Iran's decision to continue to breach uranium enrichment levels set under the 2015 nuclear accord. Iran had initially given Europe a 60-day deadline ending on 7 July to relieve penalties on buying Iranian oil - otherwise initial commitments could be broken.
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