EUR: Markets may be underestimating risks from ‘Super Political Sunday’ - ING

The story for the euro this week is one of caution as markets shift their focus to the political equivalent of ‘Super Sunday’ this weekend (4 Mar) – with both the Italian elections and the SPD vote on the Grand Coalition on the same day, explains Viraj Patel, Research Analyst at ING.

Key Quotes

“We think the market may be underestimating the risks here – especially given that the EUR’s pro-cyclical and portfolio inflow-driven rally could run out of steam if political risks stay slightly elevated in the near-term.”

“On the data front, we'll get our first look at Feb EZ inflation (Wed); our team thinks prices will remain flat at best and this is unlikely to spur any further ECB tightening sentiment. We see politically-induced downside risks for EUR/USD this week towards 1.2100/30.”