Talking Points:
- Italian GDP forecasts reduced across the board, unemployment rate seen higher
- Euro-Zone GDP forecast lowered, CPI to hit 1.6% in 2018
- Brexit’s impact on Euro might be felt through the Italian banking system
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According to a survey released by Bloomberg, economists now expect lower readings in most economic indicators for the Italian economy and the Euro-Zone.
The survey by Bloomberg News from July 8 to July 15 signaled that the likelihood of a recession in the Euro-Zone is seen at 13% and 18% in Italy.
Forecasts for Italian GDP were lower across the survey period with the year-on-year figure expected to print 0.9% in 3Q’16 (versus a 1.0% prior) and remain so throughout the forecast horizon, lower than all the previous survey figures.
GDP forecasts for the Euro-Zone were reduced as well throughout the forecast horizon, with the most meaningful downgrade seen at 1Q’17 to 1.1% versus 1.6% prior, perhaps on the backdrop of the Brexit decision.
CPI forecasts were reduced significantly in Italy with the 1Q’17 figure seeing the steepest downgrade to 0.8% from the prior 1.2% forecast.
The Euro-Zone’s CPI forecast was little changed with only a minor revision lower to 1Q’17, and was seen as hitting +1.6% in 2018, which is still quite meaningfully below the ECB target of just below +2.0%.
Italian unemployment rate was seen higher than the prior prints, with an average of 11.5% in 2016 and 11.1% in 2017 (versus 11.0% prior).
A decade of low growth and low interest rates have hampered the Italian banking system, which might now signal Italy as Euro-Zone’s biggest problem. Fears from the banking situation might have found their way to the forecasts above, and the situation could find itself increasingly in the spotlight for the weeks and months ahead.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 46.1% of traders are long the EUR/USD at the time of writing.
You can find more info about the DailyFX SSI indicator here.
EUR/USD Daily Chart: July 18, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
