Euro rises after Italy ends political chaos; ECB ahead
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The euro rose against the dollar and yen on Monday after Italy finally formed a government, ending two months of political uncertainty, but further gains may be limited given expectations the European Central Bank will cut interest rates this week.
Italy's new prime minister, center-left politician Enrico Letta, named a coalition government on Saturday, a move that drove Italian stocks higher and benchmark borrowing costs to their lowest level since October 2010 at an auction on Monday.
Some analysts say the euro could weaken should the ECB cut its main interest rate by 25 basis points from 0.75 percent currently when it meets on Thursday; a rate cut would erode the euro's interest rate advantage over the dollar and yen.
"The euro would likely weaken somewhat on that, but the overall move will be muted," said John Doyle, currency strategist at Tempus Consulting in Washington, D.C. "The expectation is starting to get priced in."
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