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Analysts at Scotiabank explained that EUR is attempting a modest stabilization in the mid-1.16s, despite testing fresh marginal 2018 lows on the back of continued political uncertainty in Italy and Spain.  

Key Quotes:

“Euro area sovereign bond markets are showing signs of continued fragmentation as  bund  spreads widen to fresh highs. Italy is likely to see another election this fall and President Mattarella has asked former IMF economist Cottarelli to form an interim government following this weekend’s rejection of the populist parties’ nominated finance minister Savona.”

“Spain’s PM Rajoy is also set to face a no-confidence vote for Friday. Risk reversals are pricing a sizeable premium for protection against EUR weakness and CFTC data have revealed a fresh build in bearish gross short positions.”

“This week’s fundamental releases include euro area CPI data on Thursday.”