Italian confidence data signals a decent start to the third quarter
The desk interprets the recent uptick in Italian confidence data as a key indicator of economic resilience, which may influence the EUR/USD pair positively going forward. Per the full note from ing-think, consumer confidence has rebounded and business confidence, with the exception of construction, has generally improved. This suggests potential upward revisions to GDP forecasts, marking a shift from a conservative outlook. As confidence grows, the implications for market positions and potential currency movements become more pronounced, particularly as the consensus targets for EUR/USD suggest a range with upside potential.
What the desk is arguing
The improvement in confidence levels in Italy indicates a promising start to the third quarter, potentially leading to more robust GDP growth than previously anticipated. According to ing-think, consumer confidence increased almost two points, while business confidence saw gains across various sectors — all except construction.
In quantitative terms, this positive sentiment could bolster consumption patterns, notwithstanding ongoing inflation pressures. Notably, the anticipated GDP growth for 2026 now leans towards the upside, suggested by recent forecasting modifications that reflect a 0.8% base case outlook. As per the latest data, the resilience shown provides room to hedge against inflationary trends and customer spending weaknesses.
Where it sits in our coverage
Our current consensus target for EUR/USD stands at 1.075, with a range noted between 1.04 and 1.12. jpmorgan projects a target of 1.10 for March 2026, while bofa sets a conservative estimate at 1.04 for the same period.
This interpretation aligns closely with jpmorgan's outlook, which denotes a stronger bullish stance on the euro in light of improving domestic fundamentals, placing our analysis at the upper bound of the consensus spread.
How other firms see it
A group of firms, including jpmorgan, views the data favorably and anticipates further euro strength, in contrast to bofa, which adopts a more cautious tone regarding the euro's trajectory amidst potential economic headwinds.
It will be essential to watch the EUR/USD developments in relation to European Central Bank policy signals and broader economic indicators as the market processes this evolving landscape. Key indicators like employment rates and consumer spending metrics will serve as critical touchstones in assessing sustainability in confidence levels.
What the calendar says
No immediate calendar events are scheduled that would impact Italy's outlook or EUR/USD movements directly. However, traders should remain vigilant for any new economic data releases that could further shape market perceptions over the upcoming weeks.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Italian consumer confidence rose nearly two points, reaching its highest level since February.
- 02Business confidence across most sectors is improving, signaling economic resilience.
- 03Potential GDP growth forecast revisions may be warranted if these trends continue.
- 04The construction sector remains an outlier in the confidence metrics, raising questions about sector-specific issues.
Market implications
Watch for EUR/USD to test levels around 1.075, with continued trader interest likely influenced by evolving employment and inflation data. Positioning may firm if confidence metrics continue to strengthen.
Risks to this view
A shift in sentiment could occur if geopolitical tensions escalate or if significant economic indicators point to weakening consumer or business confidence, potentially tilting forecasts back towards a more cautious stance.
Older quick take Quick take Published 11:01 Italy Italian confidence data signals a decent start to the third quarter The improvement in Italy's latest confidence data is broad-based, with the construction sector the only outlier. So far, the economy has proved resilient to geopolitical conflict and energy shocks. Should this be confirmed throughout the summer, average GDP growth for 2026 will likely be higher than our current 0.8% base case forecast Risks to our GDP growth outlook for Italy are now tilted to the upside Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Paolo Pizzoli Senior Economist, Italy, Greece Since yesterday, we've seen that the Italian economy proved relatively resilient to external shocks over the second quarter, posting decent 0.2% quarterly GDP growth.
Today’s confidence release provides the first insight into developments over the third quarter. According to the data, this seems like a good start. The improvement in confidence reported by Istat is broad-based, involving consumers and businesses alike – except for the construction sector, where confidence fell markedly.
Consumer confidence rebounded soundly Consumer confidence was up almost two points, reaching its highest level since February. Consumers are more concerned about the current and future economic situation and consistently report declining concerns about future unemployment. The reported opportunity to save remains at a relatively high level, and intentions to purchase durable goods show a modest improvement.
The ongoing erosion of purchasing power as inflation outpaces wages is still biting, but stabilising employment might act as a hedge. We still believe that consumption decelerated over the second quarter, but the final data might prove that the decline was less severe than expected. Business confidence improved across the spectrum, except for construction The business front also brings good news.
Confidence gained a full point among manufacturers, service providers and retailers. The brightest spot is manufacturing, where confidence reached the highest reading since June 2023, driven by improving orders and growing production expectations. Within the services domain, the improvement was more notable for information and communication, as well as transport and storage, with solid gains in the current conditions indicators and in orders.
Meanwhile, confidence deteriorated in tourism activities – possibly the most exposed category to the side effects of the war in the Middle East. The construction sector represents the exception. Here, confidence fell almost five points, reaching the lowest level since February 2021.
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