Forex Flash: Italian auctions a major hurdle for bond and FX markets - Societe Generale

Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that today´s 5yr tap and sale of a new 10yr BTP in Italy (at 10:00a.m GMT) is a major hurdle for both bond and currency markets.

He notes that here is talk in the press of a possible alliance between Beppe Grillo’s 5-Star Movement and Pier Luigi’s Democratic Party, but that looks like a distinctly anti austerity mix which could easily prompt the rating agencies to downgrade Italy. There remains a close correlation between the performance of Italian bonds and the Euro as credit concerns drive FX, and whether EUR/USD builds a base above 1.30 or moves to a new 1.25-1.30 range, may depend somewhat on today’s auction result. He finishes by writing, “I am nervous, to say the least.”