The ‘big’ dollar has edged lower while Italian bond yields have declined again. Meanwhile in Madrid, parliament is set to vote Friday (June 1) whether to oust Spanish PM Rajoy. Here are the five things you should know.
The EUR saw 11-month lows after Italy’s president scuttled an attempt by a coalition of Italian anti-establishment parties to form a government. With fresh elections increasingly likely, markets should expect the Five Star and the League to campaign on the idea that they were denied the “right to govern,” possibly resulting in a stronger populist sentiment at the next election.
Trade war talks are back and the dollar is under pressure. Reports that the U.S. commerce department has opened up “a section 232 investigation into the imports of cars to determine their effects on America’s national security” is ringing alarm bells given what happened when the U.S. imposed steel and aluminum tariffs in March.
Italian political uncertainty continues to dominate European domestic asset prices. Since yesterday, Italian bond yields have ballooned on reports of a draft government program, penned by the proposed populist coalition, the introduction of procedures within the eurozone to allow countries to quit the euro.
The week offers a plethora of new data along with monetary policy announcements from the Reserve Bank of Australia later this evening and the Federal Open Market Committee on May 2. U.S. trade policy will be markets focus this week with U.S. Treasury Secretary Mnuchin visiting China for high-level trade talks.