The single currency had a rough morning on Tuesday as it kept grinding lower during the Asian session and hit 1.1757 against the greenback. The upcoming Italian government is keeping investors on their toes amid promises the 5 Star Movement and the League would fight Brussels’ budget guideline, claim the control of the country’s immigration policy and ask the ECB for a debt write-off.
However, the euro and Italian equities bounced back after the populists proposed Giuseppe Conte for prime Minister. His lack of political experience, together with the fact that, if chosen, it will have to answer to both the League and the 5 Star Movement, raise concerns about the viability of such a government. EUR/USD rose 0.60% to 1.1830, while the FTSE MIB surged 0.75% to 23,270 points.
Overall, the buck has been struggling to extent gains further lately. Especially against the Swiss franc as the uncertainty generated by the Italian situation has forced investors to maintain a cautious bias. USD/CHF currently trades at around 0.9965, down 0.90% from May 10th high. However, this situation doesn’t benefit the Japanese yen that has been suffering a substantial debasement with USD/JPY rising to 111.39, thanks to the BoJ that is doomed to maintain its QE in unchanged.
By Arnaud Masset
