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According to analysts from Danske Bank, the focus in the Eurozone next week will stay on Italy and the ongoing budget situation.

Key Quotes:  

“The Italian government settled for a budget deficit of 2.4% for 2019-21 , but following concerns voiced by senior EU officials and Italian President Mattarella about Italy’s new fiscal path, the government moderated some of its longer-term deficit targets. That said, the government’s budget plan is based on optimistic growth and interest rate assumptions, while the revenue side remains vague. Italian government bonds have come under renewed pressure, not least because of lingering worries that Italy might be steering towards a new debt crisis in the medium term.”

“The next focal point for markets will be 15 October, which is the deadline for the budget draft to be presented to Brussels, and our base case is now that the Commission will give a negative viewpoint on the budget.”

“On Thursday (13:30 CEST), we will get the ECB minutes from the September meeting. Since the meeting, central bank communication has been less dovish, so we will look at the assessment of the underlying inflation dynamics and in particular wage growth. Wage growth played a central part in the meeting in September. We will also look out for any discussions in relation to trade war/protectionism. Finally, yet importantly, Draghi made it very clear that reinvestments have not been discussed, so chances of colour on that are slim.”