Forex Flash: All Roads leading to Rome... again - BBH

FXstreet.com (Barcelona) - Brown Brothers Harriman analysts believe that Italy´s unresolved political situation is coming back to the fore.

They feel that this is evident with the new pressure on Italian bonds. They see that the 2-10yr yields are up around 15 bp, a bit more than prior to the lukewarm, but acceptable bond auction. They note that the center-left Bersani appears poised to tell the president he cannot put together a government and the lack of cooperation between the three main groupings (the PD's center-left, the PDL's center-right and Grillo's 5-Star Movement) has given rise to speculation of a new technocrat government.

They write, “While this is possible, we suspect there may be another attempt by Bersani's rival for PD leadership, the Florence mayor, Renzi, who has better relations with the center-right. Bersani ran a weak campaign, snatched defeat from the jaws of victory, and now has failed to find the mechanism to form a government. Renzi's candidacy may alienate the left wing of the coalition, which itself make a deal with the centrists, like Monti, and the center-right more likely.”