EUR: Changing fortunes – Nomura

Euro came under additional pressure this week on renewed concerns on Italy, points out the research team at Nomura.

Key Quotes

“It was reported that the new coalition was considering propositions such as asking the ECB to cancel the Italian government bonds it had purchased via the PSPP, or make provisions for countries to exit the euro should they wish. Both these have been removed from the agenda, but BTP/Bund spreads remain around 17bps wider. Our rates strategists have taken profit on their Italy/Spain widener, with the market moving price action seeming to have gone too far. FX markets have also stabilised.”

“The portion of Italian bond investors outside the euro area is very small – just 5%. Therefore, we do not expect EUR to react much to Italy’s politics and think the rates market is a better place to position for Italian political risks. We thus continue to recommend holding EUR long exposures via EUR/USD spot and EUR/CHF and EUR/JPY options.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.