EUR: Politics not in the driving seat - Nomura

Analysts at Nomura offered three reasons for more benign FX reactions in respect to the euro.

Key Quotes:

"European politics have been attracting persistent market interest. While Spanish domestic politics have generated headlines recently, the Italian election is set to be the next focus. Nonetheless, we see three reasons for a less significant EUR reaction that occurred ahead of French election (especially against JPY and USD): 

1. Apparently much lower EUR sensitivity to peripheral spreads.
2. Higher EUR sensitivity to rate spreads and data as the ECB prepares to start policy normalisation.
3. Much smaller exposure to Spanish and Italian bonds outside the euro area. More fundamentally, we also judge that the recent attempt to change electoral law will decrease the risk of a euro-sceptic government in Italy. We currently keep our bullish view on EUR, and this time around, we judge European politics will be less important for EUR trading."