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Fundamental Morning Wrap: G20 wave BoJ through as Italy stalls

FXstreet.com (Barcelona) - An especially quiet morning for institutional research has seen focus fall on the ongoing Italian political deadlock, with Presidential voting expected to commence today, alongside the G20 giving Japanese monetary policy the all clear.

JPY

David Hauner of BAML notes that not all GEM´s are Japan´s friends. He adds that BoJ intervention has given rise to expectations of major EMFX appreciation. However, he adds that despite BoJ, G10 liquidity support for GEM growth is slowing. Derek Halpenny of BTMU notes that following the G20, confirmation from Japan's FinMin Aso that there had been no opposition to Japanese measures, fuelled a resumption of Yen weakening overnight and into the morning session.

EUR

Derek Halpenny of BTMU notes that the latest wobbling in Italian politics has undermined a previous sense of relief that a replacement for the outgoing President could be found. However, he adds that financial markets now look ambivalent to the ongoing gridlock. Danske Bank analysts reiterate this point, noting that voting is set to continue today, while European bond auctions have passed successfully, possibly supported by Japanese bond buying. Gareth Berry and Geoffrey Yu of UBS expect the market to continue shifting forward expectations for rate cuts. They write. “Given the experience with the OMT, we can expect sufficient speech guidance from the ECB.”

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