Why it's all about Italy today

Author: Adam Button | Category: News

Italian stocks down, Swiss franc up

Most of the moves in foreign exchange today can all be traced back to a single headline that we covered yesterday and didn't get any initial attention from markets.

That was part of a leak of the agenda document of the coalition between Italy's Five-Star and League. It had a few other elements that were also concerning but toying with sovereign bonds and monetizing them is the kind of thing that always spooks the market.

Italian 10-year yields are up 14 basis points to 2.09% today with German 10s down 5 bps.

Moreover, there is some major pain in Italian stock markets with the MIB down 2.1% and banks getting hit hard and the banking index down nearly 4%.

It's spread to the euro, which is at a new low since December at 1.1767.

In turn, a bid has materialized in the Swiss franc as Italian and European money searches for a safe have. EUR/CHF is back under 1.1800 and to the lows since early April (Justin has more on what's next).

Later today, the final document from 5-Star and League will be released. If it contains something less-radical, expect a bounce in the euro and Italian stock markets.

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