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Investors Nervous About Italy’s New Government

By Swissquote Ltd (Arnaud Masset)Market OverviewJun 01, 2018 12:22
Investors Nervous About Italy’s New Government
By Swissquote Ltd (Arnaud Masset)   |  Jun 01, 2018 12:22
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The FX market reacted little to the announcement of a coalition government in Italy. President Sergio Mattarella finally approved the list of ministers presented by Prime Minister Giuseppe Conti.

The single currency reported some modest gains against most of its peers. Obviously, safe haven currencies fell the most as the risk sentiment improved somewhat. The Japanese yen slid 0.30% against the single currency with EUR/JPY sliding to 127.50, while EUR/CHF consolidated around 1.1530.

On the other hand, the equity market’s reaction was sharper as the FTSE MIB surged 2.65% to 22,350 points. Italian banks were leading the charge with Banco Bpm (LON:0RLA) up 7.25%, Bper Banca (LON:0MU6) up 6.25% and UBI (LON:0LBN) rising 5.75%.

The new government is formed of Matteo Salvini (leader of the League) as interior and deputy prime minister, Luigi DI Maio (leader of the 5-star movement) as industry and deputy prime minister, Enzo Moavera Milanesi as foreign minister, Giovanni Tria as finance minister, Elisabetta Trenta as defence minister, while the eurosceptic economist Paolo Savona, who was refused as finance minister, will be in charge of EU affairs.

The government will be sworn in today. Italian sovereign yields continued to eased ahead of the weekend: the 2-Year fell to 0.74%, while the 10-Year one reached 2.60%.

Despite this good news, investors are not sleeping soundly yet. Indeed, the Italian government has a busy program and it is not exactly in line with what Brussels likes, especially in term of immigration and budget policy. Therefore, we expect that the market will not switch fully into risk-on mode, especially against the backdrop rising trade tensions between the US and EU – among other countries.

Disclaimer: While every effort has been made to ensure that the datat quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.

Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.

Investors Nervous About Italy’s New Government

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Investors Nervous About Italy’s New Government

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