Euro enjoys second day of relief as Italian tensions ease

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Political risks in Italy drove the Euro to a multi-month low against the U.S. Dollar.

Analysts fear that the Euroscepticism of the League Party and Five Star Movement could ultimately spill over into a Brexit-like disaster where Italy not only crashes out of the single currency but also out of the EU.

'The new government will make sure that the rights and the dignity of 60 million Italians will be respected, ' Salvini said in a statement, adding that 'Italians expect from Europe cooperation and not insults'. The political upheaval will likely lead to new elections, and investors are interpreting the new vote as a referendum and that Italy could move closer to abandoning the euro if populist parties win the election.

Asian equities slid today as concerns about the repercussions of Italy's political turmoil and the renewal of trade tensions between the U.S. and China gripped financial markets. Those companies depend on strong sales outside the U.S.

Analysts at the Peterson Institute for International Economics said in a blog post that "none of the powerful stabilization instruments that the euro area has developed over the years could be deployed to rescue Italy". The Japanese yen climbed 0.3 per cent to 108.49 per United States dollar, extending a 0.7 per cent climb to the strongest in five weeks.

The British pound advanced 0.3 percent to $1.3288.

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The 10-year Treasury yield was at 2.871 per cent after brushing a 1-1/2-month low of 2.759 per cent on Tuesday. The Russell 2000 index fell far less than the Dow average, giving up 3.28 points, or 0.2 percent, to 1,623.65.

June U.S. Dollar Index futures finished the session at 94.050, down 0.065 or -0.07%. The sharp move higher reflects weakening confidence among investors in Italy's government.

In Spain, political vacuum looks set to be averted as Pedro Sanchez was nearly certain to become Spain's new Prime Minister after his socialist party secured enough votes to topple Mariano Rajoy in a confidence vote scheduled on Friday over a corruption case. The 1.1500 level also corresponds to trend line support from the December 2016 lows at 1.0340.

The Canadian dollar stood at C$1.2945 to the US dollar, after falling 0.65 percent the previous day.

Just last week, Italian bond yields reached their highest level in almost three decades, climbing over 100 basis points over a two-week period, surpassing that of the USA 10-year Treasury, which has tumbled 34 basis points since May 13, according to CBRE research from May 30. Brent crude, used to price worldwide oils, shed 38 cents to $75.11 a barrel in London. US crude rose 0.2 per cent to $67.19 a barrel. It dropped 1.7 per cent to $66.73 a barrel in NY. The USD/CAD closed at 1.2963, up 0.0089 or +0.69% after President Trump announced tariffs on Canadian steel and aluminum. S&P/ASX 200 Index dropped 0.8 per cent. Kospi index slid 1.3 per cent. Hang Seng Index futures were down 0.6 per cent. S&P 500 Index futures lost 0.2 per cent. S&P 500 declined 1.2 per cent, dropping below its 100-day moving average for the first time since May 9.

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