USDCAD TECHS: Strong Bounce

Delivering the customary address to the Senate ahead of the European Council summit, PM Giorgia Meloni speaks on several issues set to come up in the 23 October leaders' meeting in Brussels. 

• Amid a drive by some countries to utilise ~EUR140bln in frozen Russian assets held in the EU to help fund Ukraine's reconstruction, Meloni says "Further measures concerning Russian frozen assets must respect international law, [and] safeguard [the] financial stability of the eurozone." Comments would appear to signal the Italian gov't is more circumspect on the prospect than others such as Germany.
• Meloni: "Italy calls on the EU to make the flexibility clause aimed at boosting defence spending permanent." The current exemption allows for increased defence spending beyond the EU's fiscal rules up to 1.5% of GDP for four years.
• On support for Ukraine: "Italy has already made it clear that it does not envisage sending soldiers to Ukrainian territory. Our position has not changed."
• On EU's green transition: "We call on the European Commission to correct a number of risky choices made in the past with the Green Deal." In draft conclusions seen by MNI's Policy team, there does appear to have been some movement on the issue of Green Transition amid pressure from national capitals (see 'MNI: EU Summit Draft Shows Pragmatism On Green Transition', 20 Oct).
• Later today, at ~16:15CET (10:15ET, 15:15BST), Meloni will deliver a similar address to the Chamber of Deputies. 

EUR STIRs see light dovish spillover from SONIAs following this morning’s soft UK inflation report, but aggregate moves are very modest.

• ECB-dated OIS now price 20bps of easing through September 2026, up from just under 10bps at the start of this month.
• There’s very little meeting-specific conviction in this pricing though. There’s virtually no implied probability of a cut at next week’s meeting, and less than 6bps of sequential cuts priced into each of the seven subsequent meetings.
• If another cut is delivered this cycle, markets lean in favour of such a move coming at a meeting with updated macroeconomic projections – highlighted by the negative Oct/Dec/Feb, Feb/Mar/Apr and Apr/Jun/Jul butterfly spreads.
• Euribor futures are flat to +1.5 through the blues.
• Regional focus remains on Friday’s flash October PMIs. The remainder of today’s calendar is light – we don’t expect much new from ECB’s de Guindos or Lagarde. 

Reuters reports comments from Slovak PM Robert Fico, claiming that his gov't can support the EU's 19th sanctions package against Russia, "If we see the demands we pushed for in the summit conclusions." As Euronews reported on 20 Oct, "The latest conclusions from the upcoming EU summit add more detailed references to energy prices and the automotive sector, the two issues that Slovak PM Robert Fico had raised as condition [sic] for lifting his veto."

• Fico has not raised objections to the actual provisions of the proposed 19th package of sanctions, which are largely intended to hit Russian LNG flows, oil infrastructure, its "shadow fleet" of ageing tankers and crypto platforms, as well as impact the movements of Russian diplomats.
• Instead, the Slovak PM has demanded that the EU "substantially" discuss high energy prices, the struggling European auto sector, and EU competitiveness. Fico argued these topics are often left to the end of any conclusions and not given enough time for discussion when compared to the war in Ukraine.
• As MNI's Policy team reported previously, "European leaders will signal a more pragmatic approach on the green transition in order to mute its impact on industrial competitiveness when they meet in Brussels later this week, draft summit conclusions show." (see 'MNI: EU Summit Draft Shows Pragmatism On Green Transition', 20 Oct).
• The gov't in Vienna withdrawing Austria's objection to the sanctions could pave the way for a vote to implement the latest package soon.