This commentary (just a quickie) comes from a note focused on equities, not FX ... but the risk for euro can be read between the lines
Italian political risk increases
- The Five Star Movement (M5S) and Lega are entertaining the possibility of forming a coalition government. More clarity on whether the attempt will succeed is likely to come by the beginning of next week.
- In the event of failure, the President of the Republic will nominate a caretaker government and new elections will take place in the coming months.
- The market reaction has remained remarkably muted. We think the market is complacent in pricing political risk in Italy. In our opinion, a Five Star - Lega government remains the outcome that would likely be viewed as the most negative by the market.
(bolding mine)
And, a little more:
Italy.
- From a macro perspective, our Economists now see new elections as more likely in the coming months than previously expected.
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ps. ICYMI:
