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Forex Flash: Muddled political situation slowly clears in Italy – Deutsche Bank

Italy's bond auction aside, the market was also encouraged by some better-than-expected US pending home sales for January (+4.5% v +1.9% m/m expected) although Durable goods orders (-5.2% v -4.8%) fell more than expected. The core part of the release was stronger though. Markets sentiment was also supported by chatter that White House will hold a meeting to discuss the Sequester on Friday. According to Politico, the White House has invited John Boehner, Mitch McConnell, Harry Reid and Nancy Pelosi for a meeting tomorrow.

According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Bernanke's testimony ahead of the House Financial Services Committee was largely a non-event expected despite the Chairman suggesting that the Fed might still decide to hold on to its bond portfolio to maturity as part of a review of its exit strategy.”

Briefly on Italy the situation remains fairly fluid as Beppe Grillo yesterday described Bersani as a "dead man walking" and repeated that he won't be joining any coalition. Meanwhile ,Finance Underscecretary Gianfranco Polillo said that a joint government between Berlusconi and Bersani is the only possible way forward. Italy's economic sentiment index fell to 77.4 in February from a revised 80.0 in January.

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