In the final day of the trading week we see another session in which Italy's 10-year yields have fallen back after having surged above 7% level earlier on Wednesday. Last check Italian yields were down to 6.66% but it had been as low as 6.57% earlier in the European session.

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We also saw French 10-year bond yields edged down to 3.37%, following yesterday's rise in yields on the back of the S&P rating agency posting to on one of their websites erroneously that the French credit rating had been downgraded. It issued a retracement, but the impact still resonated throughout markets in yesterday's session causing a sharp run-up in French yields.

This episode was particularly curious considering France unveiled a new five-year €65 billion supplementary budget that was aimed at making sure that France meets its fiscal targets earlier in the week.

Italian Senate Passes Budget Measures, Lower House Next on Saturday

width=380In Italy, the Senate voted on austerity and reform votes needed in order to cut the deficit and liberalize the economy. The Senate passed the vote and now the vote moves to the lower house which will vote on them on Saturday, after which the Prime Minister Berlusconi is set to resign and Mario Monti is set to step in and take over a caretaker government.

Monty has the support of the opposition as well as smaller centrist parties but still needs the cooperation of the People of Liberty party as well as other parties within the ruling coalition in order to have a stable government.

These reforms are likely not enough to meet the demands of the EU according to the Italian Senate Finance Committee head Mario Baldessari. Once Monti takes over therefore even more measures will likely be needed.

Still the market is taking comfort from the fact that the reform plans, which include privatization plans, and the opening up of labor markets, as well as the ouster of Berlusconi,  are happening in a much faster timeframe than originally anticipated earlier in the week.

width=372A New Prime Minister in Greece

In Greece meanwhile we are going to see the swearing in of the Lucas Pepedemos, a former vice president of the ECB, today as the head of a unity government.

The finalization of picking a new Prime Minister has helped to impose a sense of stability following the rocky last 2 weeks in Greek politics. Here too the main goal is to pass and implement budget cuts in order to meet the international requirements needed to secure further outside assistance.

Spain Growth Flat in 3Q

While Spain has certainly faded into the background amid the turmoil in Greece and Italy, we saw third-quarter GDP data from the country today and it was flat for the quarter. With the macro economic picture in the euro zone weaker than expected Spain looks likely to miss its 2011 deficit target of 6% of GDP, with an EU report today showing their expectation that the deficit will be 6.6% of GDP.

There is an election set for November 20 - a general election - and it seems likely that whoever wins will have to accelerate austerity measures in order to keep Spain in line with its targets.

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The People's Party, which polls show will win the general election, has pledged to regain Spain's AAA rating and to reduce borrowing costs without raising taxes or cutting pensions.

If your're not going to raise taxes, then that means further cutback in government spending.

EUR Edges Up as Traders Feel

The euro edged up today against the dollar climbing to a high of 1.3670, though the intraday range, currently at about 80 pips is one of the smallest we've seen recently. Following the sharp decline we saw on Wednesday traders remain cautious, but at least see positives and signs of stability now that's the leaders of Italy and Greece are being turned over.

Nick Nasad is the Chief Market Analyst at FXTimes - provider of Forex News, AnalysisEducationVideosCharts, and other trading resources.