TheÂ EUR/USD currency pair today dropped toÂ new 10-month lows following political turmoil inÂ Italy where aÂ new election is likely toÂ happen asÂ early asÂ July. Investors dumped theÂ euro asÂ Italian bond yields rose toÂ new highs, which increased theÂ yield spread between theÂ German andÂ Italian 2-year bonds.
TheÂ EUR/USD currency pair today dropped from aÂ high ofÂ 1.1639 toÂ aÂ fresh 2018 low ofÂ 1.1510 andÂ was onÂ aÂ downtrend atÂ theÂ time ofÂ writing.
TheÂ political uncertainty inÂ Europe’s fourth-largest economy has rattled investors hence driving theÂ yield onÂ Italy’s 2-year bonds above 2%. This creates aÂ major problem forÂ theÂ Italian government asÂ it increases theÂ cost ofÂ borrowing, which could cause theÂ country toÂ default onÂ its debts. TheÂ pair briefly recovered after it emerged that theÂ 5 Star Movement did not want toÂ pull Italy out ofÂ theÂ EU. Italian President Sergio Mattarella appointed Carlo Cottarelli asÂ interim Prime Minister to spearhead fresh elections. Many analysts andÂ even successful investor George Soros are predicting that aÂ major crisis might engulf theÂ Eurozone due toÂ theÂ Italian political crisis.
TheÂ political problems inÂ Italy were further compounded byÂ theÂ uncertain political situation inÂ Spain where Prime Minister Mariano Rajoy might be facing aÂ vote ofÂ no confidence later this week.
TheÂ currency pair’s future performance is likely toÂ be influenced byÂ tomorrow’s German unemployment data, French GDP data, andÂ US GDP data asÂ well asÂ theÂ political events inÂ Spain andÂ Italy.
TheÂ EUR/USD currency pair was trading atÂ 1.1541 asÂ atÂ 17:53 GMT having declined from aÂ high ofÂ 1.1639. TheÂ EUR/JPY currency was trading atÂ 125.28 having dropped from aÂ high ofÂ 127.19.
If you have any questions, comments or opinions regarding the Euro,
feel free to post them using the commentary form below.