Italian Referendum Outcome Adds Pressure

Italian Referendum Outcome Adds Pressure

The Italian referendum result has brought a massive typhoon for the prime minister Matteo Renzi. His resignation was inevitable due to the vile outcome of this referendum. This opens the floor of an early election and presents more political instability for the country which is not a great news for its growth.

The Euro is taking a hit on the back of this news as expected and we anticipate that this move could continue for some time. Although, the selloff is not intense as there is nothing new or any kind of surprise. The market was expecting this outcome and results have come in line with the expectations.

Despite this, the Italian sovereigns bond yields may continue their surge as investors will ask higher return for their risk. The ECB, which is going to meet later this week, will have to provide more details about their plan in order to address this issue. Italian banking sector may become the direct causality of this outcome and during the European session we could see some more selling.

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