Europe: Risks of instability rising - Westpac

Tim Riddellisks of EU instability from a rejection of Italy’s reform referendum are increasing as polls (if they are worth anything) show rising support for “No”.

Key Quotes

“Renzi is playing hardball on EU budget negotiations and this too could impact the Eurozone as the election and the next ECB meeting (8th December) approach.”

“Recent data releases have started to miss expectations on the downside. The backdrops of the Trump victory, Italian referendum and candidates being announced for French, German (Merkel going for a 4th term) and Dutch elections next year may start to impact survey data.”

“Every week seems to bring further SNB comments about NIRP being appropriate. Swiss CPI showed persisting deflation risks while EU aggregates fail to inspire. Both EUR and CHF should continue to decline against the rising USD.”

“EUR/USD’s accelerated slide from 1.11 looks set to test 18-month range lows in the 1.0455-1.0525 area.”