This morning the Consumer Price Index was released with the data coming in is as expected for November. The year on year figure stayed the same however inflation in the Eurozone has fallen since the last month. The current slowdown in Europe is not causing too much concern just yet however if this is to continue there could be nervousness creeping into the Euro’s value.
Italian Bank bailout
Monte dei Paschi de Siena is set to be bailed out by the government before Christmas as an attempt to raise the required 5.7bn Euros looks very unlikely. The Italian government are keen to avoid the European Central Bank becoming involved in the matter, however there is major cause for concern with the 5 Star Movement party on the verge of causing political uncertainty.
Matteo Renzi’s referendum loss has turned an already difficult situation into a ticking time bomb with a general election just around the corner.
Considering Italy are sat on $380bn of defunct loans adding even more debt to the burden seems risky. There is little evidence to suggest that current bailout packages will be met and it seems even more likely that major reforms will happen. The format in which that might take place looks to have fallen into the hands of the popular right wing party.
The Italian predicament could have a major impact on the currency markets over the Christmas break. Due to there being less market activity any breaking news can cause significant swings.