Italian elections spook risk

<p>The Italian parliamentary elections have failed to produce a clear winner sending panic through the equity and FX markets. Just when it seemed the European […]</p>

The Italian parliamentary elections have failed to produce a clear winner sending panic through the equity and FX markets. Just when it seemed the European crisis was off the front pages the political uncertainty in Italy has the markets running for cover as the market likens the current situation to that of Greece last year although we have to remember that Italy is the third largest European Economy. These results have certainly made it clear that the Italian voters are not prepared to accept the combination of austerity and negative growth that the EU’s policies have encouraged.

With a hung Parliament and a re-election looking the most likely outcome we are seeing a sea of red in the equity markets with Italian Stocks not opening with the market limit down.

FX markets saw volatility that I haven’t seen since 2007-2008 last night as the single currency dropped from 1.3319 yesterday to 1.3017 with EUR/JPY the FX markets barometer to risk falling from 125.20 to 119.00 in less than 8 hours.

Today the focus will undoubtedly surround the fallout from the Italian elections as Fed chairman Bernanke takes the stand for the first part of his semi-annual testimony before congress with the hope he may calm markets following last week’s hawkish FOMC minutes. The market expects him to give no hint to the end of QE and is likely to remain firmly dovish with anything different like to bring further pain to risk markets.

 


EUR/USD

Supports 1.3000-1.2890-1.2835 | Resistance 1.3095-1.3125-1.3165


USD/JPY

Supports 91.30-91.25-90.90 | Resistance 92.30-92.85-93.10


GBP/USD

Supports  1.5100-1.5050-1.5000 | Resistance 1.5235-1.5270-1.5325

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