(19 NOVEMBER 2018)DAILY MARKET BRIEF 2:European Commission versus Italy

Eurozone equities remain in green, despite continued conflict over Italy’s budget. The BTP-Bund 10-year spread has remained at 3.05-3.15% since last Wednesday, suggesting that investors’ fear over Italian fiscal policy risk is stabilizing. The European Commission will be taking its final decision on Italy’s budget on 21 November. That might prompt a drastic change, if the Commission decides to impose sanctions (0.20% of GDP deposit, plus a freeze on billions of Euros in EU funds). EUR/USD is currently trading at 1.1420 and is expecting to bounce slightly along to 1.1445 short-term.