EUR: Italian banking woes unlikely to affect much - ING

A modest improvement in German IFO (likely due to the relief after the French parliamentary elections) should be modestly EUR supportive, though EUR/USD is unlikely to move materially above the 1.1200 the level as investors await EZ and US inflation data later this week, according to the research team at ING.

Key Quotes

“The news over the weekend about the Italian government EUR 17bn rescue package (immediate EUR 5bn injection + EUR12bn guarantees) to shore up failing Veneto Banca and Banca Popolare di Vicenza should have a very limited negative impact on EUR (as was the case during 4Q16 Italian banking woes). With investors well aware of this risk, the ECB floating a credible threat to do “whatever it takes” to save the euro and EUR looking meaningfully undervalued, the bar for a risk premium driven EUR decline is set very high at this stage.”