The main currency pair is staying close to its five months low.
EURUSD is trading near the lows it reached five months ago due to investors’ uncertainty relating to the Italian policy. The current quote for the instrument is 1.1750.
At first, investors were worried by the elections and their results, then – controversial and complicated process of making the governing coalition. At that time, it seemed that Italy might overcome these political disturbances once the country’s politicians made a “bargain” to cooperate and work in the same direction. However, in reality in turned out to be not as simple as it seemed.
Indeed, the coalition in Italy was formed, but it is the subject of much controversy. First of all, the coalition is populistЖ its major goals are about being economical with finance and abandoning familiar energy resourceы in favor of renewable ones. These ideas might really hurt Italy’s and Enel’s (an Italian multinational manufacturer and distributor of electricity and gas) budget. The coalition’s strategy is of a deflationary nature and investors know perfectly well that the deflation may destroy the economy much faster than the inflation.
Secondly, right now no one can guarantee that the two parties of the coalition (The Five Star Movement and the Northern League) won’t have any problems with their further cooperation: it took them two months to form a coalition.
In other words, the Italian political life is so vague right now that investors prefer to keep away from the Euro and try to sell it again each time it recovers more or less.
There won’t be much significant news for the European currency today. In the afternoon, investors are expecting the ECB Financial Stability Review, but it is unlikely to offer any surprises for them. In the middle of the week, there will be some report that will be analyzed more carefully, such as the ECB Monetary Policy Meeting Accounts. However, so far, the fundamental background for the Euro is negative.
Orgin: RoboForex
