S&P will deliver their review on Italy's sovereign debt rating
You know it feels like it's been a long week for the euro when Moody's review last Friday - which helped to lift the euro at the start of the week - is like a distant memory now. As it stands, the euro is headed back for a test of the year's lows against the dollar now that the ECB is out of the way and has offered no helping hand to the single currency.
All eyes will turn towards Italy once again and S&P may deal the final blow that will heighten market fears even more. Currently, Italy's rating is BBB and the outlook is stable and a downgrade alongside a negative outlook will no doubt widen the spread between German and Italian bonds yields even further.
The spread now hovers around 300 bps still but if it widens well beyond that, expect the euro to come under the cosh especially after Draghi's comments yesterday. Draghi said that Italy would need to get a bailout from the European Union if they want to receive any help from the ECB and that's still tough to envisage at the moment, particularly when the commission is trying to get Italy to lower its fiscal deficit target but the government just isn't willing to listen.
The review today will come late when markets are nearing the close so moves may be limited but this will be a good indicator of how investors - particularly of Italian bonds - will react next Monday.
