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Week Ahead (4 November)



Monday 4 November, ECB to release latest TARGET2 data


Today the ECB will release the latest data on the balances in its TARGET2 mechanism – something which has been highlighted as indicative of a return to the malaise which engulfed the Eurozone in 2010/2011.


Rather than showing a financial crisis, the return of TARGET2 imbalances coincided with the ECB’s asset purchase programme. The Bundesbank credit balance hit a record of around €966.2 billion in December 2018 and fell off dramatically in January 2019 when the ECB’s asset purchase programme came to an end.


Similarly, the higher TARGET liabilities incurred by the Bank of Spain and the Bank of Italy, reflect the fact that their respective purchases of Spanish and Italian debt are often from sellers that hold accounts in Germany. Therefore, TARGET2 balances are as much a reflection of where bondholders prefer to bank rather than distress.


w/c Monday 4 November, Italian draft budget to be scrutinised by parliament with implications for government stability


The upcoming week will be marked by a series of political negotiations in order to issue the definitive version of the Italian draft budget law. Economy Minister Roberto Gualtieri already unveiled the €30 billion plan, that will now be scrutinised by parliament. Within government, Italia Viva’s Matteo Renzi is being particularly vocal with his insistence that no new taxes be introduced, not even environmental taxes such as those proposed on plastics or company cars. In opposing the plastic tax, Renzi could have one eye on the crucial regional elections in Emilia Romagna in January, where 40% of all EU packaging is produced.


Monday 4 November, Televised debate will see party leaders hope to break through voter fatigue


This evening, Pedro Sánchez (PSOE), Pablo Casado (PP), Albert Rivera (Ciudadanos), Pablo Iglesias (Unidas Podemos) and Santiago Abascal (Vox) will go head-to-head for a televised debate. Applications for postal votes are down 30% compared to April’s general election which suggests voter turnout will be low. This may help the far-right Vox party who looks to have mobilised more support amid the secessionist fueled unrest in Catalunya. The average of the latest polls gives Vox around 12% support which would translate to around 35 seats.


Thursday 5 November, BoE likely to keep rates on hold as market more optimistic on chances of a deal


While the Bank of England (BoE) is likely to keep rates on hold next Thursday, lower than expected GDP data for August, continued inconsistencies in inflation data and a deteriorating global backdrop will leave investors carefully watching for a more dovish outlook from the monetary policy committee. Investors will also be keeping an eye on the publication of costings associated with Labour’s spending pledges, as estimated by Treasury civil servants. This is likely to take place on Tuesday.


Sunday 10 November, Romanian presidential election


The first round of presidential elections will take place in Romania on Sunday 10 November. A possible second round will take place on 24 November. Current President Klaus Iohannis of the National Liberal Party is the frontrunner. The two most influential other candidates include Liviu Pleșoianu, a member of the Chamber of Deputies for Bucharest since 2016 for the Social Democratic Party (PSD) who declared his candidacy on 23 July 2017, and Dan Barna, the new President of the Save Romania Union (USR), the third largest political party in the country.

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