Economics
Euro Bulls Aren’t Worried About Contagion From Italy
- What matters are the systemic implications: Deutsche Bank
- JPMorgan sees 400-basis point spread as ‘pain threshold’
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Investors who are bullish on the euro needn’t lose sleep over Italy yet because any signs of strain are due mainly to political implications rather than the economic impact.
Despite the Italian market turmoil, the country’s bonds may still have to fall further for contagion to spread into the foreign-exchange market, according to Deutsche Bank. And unlike during the slump in the nation’s securities in May, there has been little re-pricing of the European Central Bank’s policy tightening, suggesting that the euro’s reaction has little to do with the economics of the Italian budget.