EUR shies away from Italian debt..............>

FOREX: EUR shies away from Italian debt discussions

-The single currency retreated Friday morning alongside Italian bonds as the

fragile governing coalition continue to push for a higher fiscal deficit target

to boost their spending plans. Italian-German 10y yield spreads widened by as

much as 30bps, helping press EUR/USD back towards the 1.16 level. Markets

clearly remain sensitive to political risk, with Italian equity markets also

sliding well over 2% so far today. Lower than expected Eurozone Core CPI did

little to underpin, pressing EUR/USD to the day's lows of $1.1610.

-GBP slid sharply as Y/Y GDP growth was revised lower (courtesy of

lower-than-previously-recorded construction output figures), pressing GBP/USD

below the 21-dma before the rate recouped the majority of the losses.

-AUD and CAD are improving alongside a modest recovery in the metals/energy

complex, while NZD/USD lags, seemingly anchored to a N$1.26bln option expiry due

to roll off today at the $0.6600 level.

-Canadian GDP, US PCE numbers and the MNI Chicago PMI are the data highlights.

ECB's Lane & Praet, BoE's Ramsden and Fed's Williams & Barkin are due to speak.