Fundamental Morning Wrap

FXstreet.com (Barcelona) - A quiet morning wrap today, shows that institutional focus is firmly placed on Europe, with the prospective pending ECB rate cut most in focus, alongside the Italian political mechanics and the plunge in German economic sentiment.

EUR

Derek halpenny of BTMU notes that ECB rhetoric of late is understandably leading to increased speculation of a rate cut in the next meeting in May, however, he adds that he suspects it may fall in June, alongside the next ECB forecasts. RBS analysts add that they do not believe that a rate cut will do any good anyway. Danske Bank analysts see that the rally in European sovereign credit is at least partly a reflection of reduced euro tail-risk concerns and hence should weigh on the currencies that tend to do well in times of European stress. Jim Reid of Deutsche Bank notes that Italy’s President Napolitano is set to announce his choice of PM to form a new government today. he adds that Reuters reported that the new coalition government could take office in a matter of days and would be backed primarily by the rivals on the centre-left and centre-right. Carsten Brzeski of ING notes that today´s German IFO survey recorded its sharpest decline since May 2012, indicating that 2013 is not 2009 and any rebound of the German economy after the contraction will be much bumpier and weaker than four years ago.