Commerz on the Italy & the euro - 'EUR weakness is coming to an end'

A piece from Commerzbank on the Italian budget, the bond market, and the euro

Their bottom line is that there is a lot to suggest that the EUR weakness is coming to an end unless Rome produces new disturbing signals.

• the bond market still sees an increased risk in the Italian government's fiscal policy
• However, what is relevant for the FX market is that this risk premium has not widened recently, but is moving sideways
• not sure whether that is fundamentally justified and in particular whether this properly reflects the political risks emanating from Italy. The only thing I do know is that: as long as Italian government bonds remain in this state the subject of "Italy risk" will slowly become irrelevant for the EUR exchange rates

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An interesting perspective.

Italy is one factor, and a big one, but there are others (ECB and Fed policy spring immediately to mind)