Forex Flash: Letta urges end to austerity at Merkle meeting -Investec

FXstreet.com (Barcelona) - Investec Treasury Analysts note that new Italian Prime Minister Enrico Letta met with Chancellor Merkel yesterday and reiterated that his government would meet its budget commitments but called for an end to austerity and urged that more policies should be pursued to lift growth.

However, they add that as Merkel continues to champion austerity saying “budget consolidation and growth need not be contradictory”, PM Letta faces a tough task to appease his coalition partners to negotiate a budget leeway for Rome. With most of Europe closed today for Labour day, the market will be less liquid and FX moves could be exaggerated on this afternoon’s US data releases which will give an insight into whether activity has picked up in April. They add, “First up, we have the US ADP employment release at 1.15pm followed by a slew of data at 3pm which includes US construction spending, ISM Manufacturing and ISM prices. Later this evening, the FOMC decision will be announced. There are no changes expected in the Fed’s policy stance but the accompanying statement will be of interest, particularly any mention of changes in economic activity based on recent data which we would expect to give the minutes a more dovish stance.”