Italy: Substantial proportion of voters are still undecided – RBC CM

Elsa Lignos, Senior Currency Strategist at RBC Capital Markets, suggests that the Italians vote in their referendum on constitutional reform this Sunday and we are now in the blackout period, so no polls can be published, but until the cut-off point they showed a growing lead for the ‘no’ side, although a substantial proportion of voters are still undecided.

Key Quotes

“A ‘no’ vote, rejecting the government’s proposed reform and probably forcing the resignation of current PM Renzi, would likely usher in a period of increased political uncertainty in Italy and would represent a major set-back for economic reform efforts. But those looking for a major EUR sell-off as a result are more likely to be disappointed.”

“Italy continues to be a long-term risk for the Euro area, but that is a two-year rather than a two-month trade. Also out this week is Nov flash inflation (the last before the ECB’s Dec 8 meeting). The pattern of recent releases looks set to continue: an increase in the headline rate but no discernible upward trend in core (RBC: 0.7%y/y). On a slightly more positive note, this week might see Euro area unemployment drop below 10% for only the second time since August 2009 (although progress remains slow).”