At the open today, Italian government bonds rose as S&P Global left the country’s sovereign credit rating unchanged, just two places above junk status. However, while S&P Global affirmed Italy at BBB, the ratings agency maintained its negative outlook on the third largest economy in the eurozone, likely leaving the euro flat. Commenting on this, Commerzbank rate strategist Christoph Rieger noted: “Some in the market were calling for a ratings cut, which is why foreign investors have been quite cautious in the run up to the S&P decision. “But on Friday when the domestic buyers returned there was already quite a bit of recovery, and we are seeing that extended into today.”
Meanwhile, Spain’s governing PSOE party won the third election in four years.
The election left the PSOE and Podemos 11 seats short of a majority, meaning they must look for support from smaller parties or from the centre right.
However, it was noted that there was little immediate impact.
Mr Rieger said: “I think markets are still struggling to understand what the vote means, which is why you are not seeing more of a rally.”
Meanwhile in the UK, reports suggest that cross-party discussions have again stalled, as both the Conservatives and Labour refuse to concede over Brexit policy, limiting demand for Sterling.
Commenting on the lack of progress in the discussions, Labour frontbencher Rebecca Long-Bailey blamed Conservative Party intransigence.
She said: “Honestly I think the discussions so far have been productive, they’re gone into a lot of detail, there seems to be a willingness on both sides to move towards some form of consensus.
“But as yet we haven’t seen the government move on any of their red lines, we’re having further discussions this week and hopefully we’ll see some movement.”
Looking ahead to Tuesday, the pound could edge up slightly against the euro following the release of the UK GfK consumer confidence.
If April’s confidence rises, the pound could receive a small boost.
Later in the day, the eurozone’s gross domestic product (GDP) for the first quarter of 2019 is due for release.
If the bloc’s preliminary GDP rises higher than forecast, the single currency could edge up against Sterling.