EURUSD – Might be under pressure on Italian budget crisis
This note is an addition to our earlier view available here. As the situation with Italian budget is getting very serious, especially with the possibility of a break up of ruling coalition and negative impact on Italian banks.
Apart from softer EZ data, continuing divergence between ECB and Fed policies, Italians are resubmitting the budget to EU today. As the government coalition is fighting internal disputes, the no agreement with EU can lead to the spike in Italian yields again, thus putting pressure on EURUSD. To make it more interesting the skyrocketing spreads between German and Italian bonds definitely, will have a negative impact on banking sector there.
EURUSD may head south through 61.8% Fibo around 1.1186 and head lower towards 1.1000 or 1.0862 (76.4% Fibo).
Source: Saxo Bank
The Italian politicians are playing an irresponsible game as Italy benefits big times from ECBs TLTRO program and declining lending rates:
Should you have any questions feel free to contact us anytime.
Good luck Champs!
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