Italian PM Nomination Weighs On The Euro

While for many Italians he continues to be an unknown political figure, yesterday he was named Prime Minister. Yes, we are talking about the Former IMF Director Carlo Cottarelli.

Political uncertainty was risen in Italy and the Eurozone following his appointment. But why? Basically, because Cottarelli seems to be a last resource used by President Sergio Mottarella to block the nomination of eurosceptic finance minister Paolo Savona.

Mottarella’s block was applauded by the French President Emmanuel Macron, who claimed his support for what he described as a “great spirit of responsibility”.

“The Italian economy is still growing and public finances are under control,” Cottarelli said. “Dialogue with the EU to defend our interests is essential and we can do better [but] it has to be constructive.”

Cottarelli tried to smooth market sentiment by delivering a few words on the economy, but investors are skeptical about his potential, and mostly likely see new elections in autumn.

The European currency reacted as expected - the EURUSD fell to a six-month low of 1.1619 by mid-session, its weakest level since November 8.

The euro has been facing strong pressure in the last year, always due a certain political context. Not long ago, German Chancellor Angela Merkel was struggling to form a government, putting at risk the political status-quo of Europe’s first economy.

Italy has played an important role for the euro too, not only because of its political opera but also due to its weak banking system, which has required the assistance of state institutions in multiple occasions to avoid a major financial crisis.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was up 0.16 percent at 94.29 by the time of this writing.

Also weighing on the euro were lower-than-usual trading and liquidity volumes. US markets were closed on Monday in observance of the Memorial Day holiday.

FortFS