EURUSD Fundamental Analysis – Italian Election Results/Employment Data
Italian election results a key focus this week
This week will see the Italian parliamentary elections, with a Bersani-Monti coalition widely viewed as the most positive outcome for broad risk sentiment and the EURUSD currency pair.
The reverse scenario, with a potentially negative impact on risk sentiment, would be a strong result for Berlusconi, this could potentially see bond yields rise and a flight to perceived safety – higher dollar and lower euro scenario. Results of the election are expected on Monday around 15:00 and will be keenly followed.
There have been no opinion polls since 9th February, the previous poll revealed that the gap in potential voting narrowed between the centre-right coalition led by former Prime Minister Silvio Berlusconi and the Democratic Party.
German retail sales and employment data are amongst the other major event risk scenarios this coming week. The change in the number of unemployed German people during the previous month is forecast at -5k versus the -16k prior reading.
FOMC meeting minutes/ LTRO loan repayment
Last week the U.S. dollar experienced a strong rally versus most of the major currencies after the FOMC minutes and weaker economic data abroad. Even the possibility of the U.S. central bank cutting the asset purchase program had market participants adjusting open positions.
Further to this, the euro hit a six-month low versus the US dollar after the ECB (European Central Bank) advised that banks in the area would be paying back only €61.1bn of the low interest rate funds pushed into the eurozone area financial system last year.
The EURUSD pair plummeted on the news as market participants widely viewed this lower than expected longer-term refinancing operations second tranche payment as an indicator of a heightened level of caution in the region, ahead of the aforementioned crucial elections in Italy.
Consensus forecasts last week had been for an initial payment of around €130bn.
(Brad Styles, Forex-FX-4X.com)