As investors are slowly preparing for end-of-year holidays and trading activities are set to decline in the coming days, investors remain majorly concerned by current broader risk events such as the Sino-American trade discord or Brexit.
Yet the rather stable development of the single currency seen since the 12 September 2019 European Central Bank decision to cut rates and resume with asset purchases could well be tarnished by upcoming regional elections held in Italy in eight regions starting from late January 2020. The latter could well confirm a resurgence of right wing political parties as well as destabilise Giuseppe Conte’s second government coalition backed by the left-populist Five Star Movement and the centre-left Democratic Party (PD).
With an economy close to stagnation with 3Q GDP maintained at 0.30% after closing in technical recession two times since December 2018, supported by private consumption amid improving labour conditions although manufacturing activities is still maintained in contraction since October 2018, it appears that the room of manoeuvre for the 3-month old new coalition stays scarce. Despite the surprising proliferation of the “Sardines” movement that should play a strong opposition role against Salvini’s Lega and far-right coalition, it seems that political tensions should remain tense.
While Conte’s government effort mainly consists of drafting a 2020 annual budget that would help gain sympathy from the European Commission instead of consolidating a common program, Italian politics might well weigh on the Eurozone in the prospect of a major defeat of regional votes and particularly in the Northern Emilia Romagna region, an historical stronghold of the leftists. While risks of seeing the PD quitting the central government is rising after a major defeat, it seems that early elections are likely to take place in 2020, before the official deadline of 28 May 2023.
Disclaimer: While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.
Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.