The Italians voted ‘No’ in the constitutional reform referendum, and
do so in resounding fashion, with a 59-41 outcome estimated. The polls
had indicated a ‘No’ win but the scale (and turnout) leave no doubt that
this wasn’t just a vote about constitutional reform. The
antiestablishment wind blowing through global politics hasn’t died down
(even if the Austrians chose Green over Freedom Party in the
EUR/USD briefly touched 1.0506 this morning, but because the vote was
largely expected, there really wasn't enthusiasm to push the move too
far as the pair staged a recovery.
From here, FX will take its cue from the BTP/Bund spreads, the equity
market reaction, and wait for rating agencies to opine. There is a
Finance Ministers’ meeting in Brussels and the big event of the week is Thursday’s ECB meeting when an extension to ECB bond-buying is likely to be announced (but possibly without any direct reference to how much they buy each month, hinting at tapering).
in all, major EUR downside isn’t likely this month, but we do still
expect a move to parity between now and the French Presidential
elections as voter anti-establishment sentiment erodes confidence.