EUR/USD Fluctuates as Populist Parties Win Big in Italian Election
The Euro US Dollar (EUR/USD) exchange rate has been rocked today as Italy’s recent election looks set to result in a hung parliament following a surge in support for populist parties.
At the time of writing EUR/USD is trending close to its opening levels this morning, with the pairing have fluctuated wildly throughout the session.
Euro (EUR) Rocked as Italian Election Results in Hung Parliament
The Euro has been met by volatility in today’s trading session as investors react to Sunday’s general election in Italy
While the votes are still being counted, exit polls suggest that there has been a considerable shakeup in Italy’s political landscape as voters turned their back on the mainstream parties.
Instead the big winners of yesterday’s vote appear to the populist Five Star Movement and the far right League party.
With both parties sharing being largely Eurosceptic the result has spooked many EUR investors as they worry that the next government may be hostile towards the EU.
Analyst also fear that the weeks of political wrangling that will follow as parties attempt to form a new coalition government, could delay any attempts to implement reforms for Italy’s struggling economy.
David Madden of CMC Markets said;
‘The votes are still being counted, but the early indication is there will be no majority. Added uncertainty comes from the rise of the anti-establishment Five-Star Movement.
‘Traders fear the nation could be plunged into a period of political unpredictability, and this could delay much-needed reforms.’
Trade War Concerns Pressure US Dollar (USD)
At the same time the US Dollar is struggling today as well as markets remain concerned over the possibility that the US may spark a global trade war.
Concerns were initially raised last week following his announcement of his plans to implement tariffs on all steel and aluminium imports to the US
The move was meet by anger from many of America’s key trading partners, with the EU threatening to respond in kind, by implementing tariffs on various US good.
However despite these threats and growing criticism from US economists Trump appears to be showing no signs of backing down, leading investors to shy away from the US Dollar.
Defending his position on Twitter Trump said;
‘We are on the losing side of almost all trade deals. Our friends and enemies have taken advantage of the U.S. for many years. Our Steel and Aluminium industries are dead. Sorry, it’s time for a change! MAKE AMERICA GREAT AGAIN!’
EUR/USD Forecast: Robust Services PMI to Strengthen US Dollar?
Looking ahead the EUR/USD exchange rate may trend lower later this afternoon as the US publishes its latest services PMI.
Economists forecast that the latest reading of service sector activity will reveal that the sector continued to expand at a robust pace in February after striking a 12-year high in January.
Meanwhile the focus for EUR investors this week is likely to be on the European Central Bank’s (ECB) latest rate decision on Thursday, with any signals of a more hawkish outlook from the bank likely to cause the Euro to soar.