EUR: Consolidation time as a lot of bad news is priced in

The euro is starting to reflect greater short-term domestic political angst; as we noted last week, the link between EUR/USD and peripheral European swap spreads suggests there may be a hefty three-four big figures worth of idiosyncratic European risks (Italy and Turkey) priced into the single currency. But while we feel that a lot of bad news is priced in, we also feel that it may be too early for any of this to be priced out meaningfully. Investors will be cautious over Turkey's medium-term economic plan (and we won't get clarity here until early September), while the next month or so will also see a narrower focus on the risks around the Italian budget (also unlikely to be resolved until September/October). Still, with Turkish markets on holiday from Tuesday this week, the former may be a reduced source of volatility for the euro in the immediate future. Eurozone data wise, we get the August PMI releases and consumer confidence (both Thursday); euro bulls will want to see some signs of consumption and investment intentions returning back online in 2H18.