Matteo Salvini, leader of the League party has called for a snap election creating political uncertainty in Italy that does not bode well for the euro.
The League party is part of a coalition with the anti-establishment Five Star movement and Salvini has stated the coalition is unworkable.
The two parties have clashed over several issues, but the current talks over a rail link between Turin and Lyon has resulted in fierce conflict between the two parties. Five Star strongly oppose the rail link due to the cost and environmental impact.
Italy currently has extremely high levels of debt, currently higher than GDP. Brussels has threatened to impose a €3bn fine if there is not a real attempt by the Italian government to show a solid plan of repayment. This could further strain the relationship between Rome and Brussels and has the clout to influence euro value.
Despite the situation with the euro it seems to be still outweighed by the UK’s problems surrounding Brexit. The euro is close to a two year low against the US dollar, yet still continues to make gains against the pound.
Eurozone GDP is due out tomorrow and could cause volatility on the market. There is expected to be little movement on quarter on quarter data, it is set to land the same as the last quarter at 1.1%.
German GDP data is also due out today and it may be the case there is a fall. It is predicted to drop to – 0.1% from 0.4%. As the engine room of the bloc this may have the power to weaken the euro.
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