Fri, Oct 22, 2021 @ 00:44 GMT
HomeContributorsFundamental AnalysisItalian Political Jitters Weigh On Markets

Italian Political Jitters Weigh On Markets

European assets in turmoil as the US and UK return from vacation

After a brief respite on Monday, financial market switched to risk-off mode on Tuesday as both US and UK traders came back from a long weekend. In the equity market, yesterday optimism has completely disappeared with equity indices blinking red across the screen. Asian market closed in negative territory with the Nikkei down 0.55% and the CSI down 0.76%. In Europe, the picture in not brighter as the German DAX fell 0.58%, the Eurostoxx 600 0.68% and the SMI 0.61%. Italian are by far the worst performer – the FTSE MIB gave up 1.70% – amid renewed about the country’s political future. Italian sovereign bonds went through another sell-off this morning with the 10-year yield jumping as high as 2.93%, up 25bps from yesterday’s close. The 2-year one currently stands at 1.57%, up 67bps.

In the FX market, investors sold the single currency and took shelter in safe-haven ones. The Japanese yen was in solid demand and rose 0.50% against the greenback. USD/JPY kept grinding lower and hit 108.79. The closest support lies at 108.65 (low from May 4th). EUR/CHF is currently testing the 1.1450-1.15 support area (low from late February and psychological level). A break of the support would open the road towards 1.12. However, the downside in EUR/CHF may be limited by the strength of USD/CHF (flat at 0.9935 today).

The Italian – and to some extend the Spanish – situation will continue to drive short-sentiment as market participants are concerned that the League and the 5-Star Movement will ask for snap elections, which would ultimately increase in the uncertainty. This environment will therefore remain euro negative.

Swissquote Bank SAhttp://en.swissquote.com/fx
Trading foreign exchange, spot precious metals and any other product on the Forex platform involves significant risk of loss and may not be suitable for all investors. Prior to opening an account with Swissquote, consider your level of experience, investment objectives, assets, income and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not speculate, invest or hedge with capital you cannot afford to lose, that is borrowed or urgently needed or necessary for personal or family subsistence. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Featured Analysis

Learn Forex Trading