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Analysts at Scotiabank explained that Italy continues to pull the EUR around by the nose ring.

Key Quotes:

“Senior politicians have tried to dampen the impact of EUR-negative comments today specifically, Rome’s clash with Brussels on fiscal policy – and the consequences of these policy decisions for Italy’s sovereign ratings remains a threat for markets.”

“While we remain bearish on the outlook for the USD, we recognise that still widening Eurozone-US interest rate differentials (2-year spreads now at -336bps) is a severe impediment to the EUR rallying at this point. The only wonder is perhaps why the EUR is not already a lot lower against the spread backdrop.”