“Italy is benefitting from only the downgrade of the outlook, which was already priced in, though some investors may have expected a one notch downgrade,” Daniel Lenz, rates strategist at DZ Bank, told Reuters.
Italy is not out of the woods yet
Nevertheless, some analysts warn that Italy is not out of the woods yet. The conflicting statements from senior officials over Italy’s commitment to the European Union’s budget restrictions has kept investors on edge and the ongoing emerging market currency woes continue to pressure the international outlook.
“I’m still 100 percent sure the good start will remain,” Lenz added. “We’re already seeing pressure on the (Turkish) lira and expect risk aversion will increase.”
On Sunday, Deputy Prime Minister Luigi Di Maio promised to follow the party’s main campaign pledge of universal income for the poor, which add further pressure on the budget deficit.
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