EUR: Low sensitivity to politics continues – Nomura

According to analysts at Nomura, the outcome of the Italian elections provided major surprises and the flows explain muted reaction of EUR to Italian election results.

Key Quotes

“Uncertainty on Italian politics remains high, but sensitivity analysis and recent flow data both suggest EUR may not be affected much by Italian politics, unless uncertainty hits global risk sentiment. Foreign demand for Italian assets may weaken, but the FX impact is likely to be muted. Meanwhile, the rising correlation between EUR and risk sentiment suggests global risk sentiment will be more crucial. We maintain our bullish stance on EUR this year.”