Italy’s budget of uncomfortable deficits and optimistic growth projections should be presented on 15th for EU scrutiny, points out Tim Riddell, Research Analyst at Westpac.
Key Quotes
“If it is rejected, Italy will need to rework the budget over a subsequent three weeks. EU Leaders’ meeting (17th-18th) could become be a forum for budget discontent. Unless there is a quick compromise over Italy’s budget (and others!), sentiment should remain heavy, as shown in the BTP-Bund spread remaining elevated around 300bps. Also, rating agencies are due to respond into month-end.”
“The expectations components of ZEW surveys tend to lead regional activity and they currently appear to be basing, or even turning. Although there is clearly a lag, this could also allow for a EUR/USD rebound.”
“EUR/USD’s 1.12-1.20 range persists. Italian risks are likely to cap rebounds while US economic strength remains a key driver.”
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