The greenback rose across the board on Wednesday morning amid general increase in nervousness to Italy’s future government. The dollar index surged to 93.975, up 0.35% on the day, as the euro dipped to 1.1711 (-0.57%), the pound sterling slid to 1.3385 (-0.35%), while the loonie gave up 0.50% with USD/CAD increasing to 1.2882.
On the other hand, safe haven currencies were better bid this morning as both the Japanese yen and the Swiss franc extended gains. USD/CHF slid as low as 0.9895, while USD/JPY returned towards 110.
Market participants are still waiting for Italian President Sergio Mattarella to approve Giuseppe Conte as prime minister. The fact the Italian President still hasn’t taken his decision suggests that he is not entirely convinced Conte would fit the job. It may sound like a good thing for investors as one may assume that if Mattarella refuses to appoint Conte, the 5-Star Movement and the League would have to propose someone with an actual political base and a stronger political background. Indeed, Conte is mostly unknown, has no political experience and is therefore unpredictable – and as you know markets like predictability.
We remain cautious regarding a potential pull back of the market against such a backdrop. Indeed, the 5-Star and the League won’t give up their program should Conte be turned aside. This period of uncertainty could last a while, especially if they want to get their hands dirty as soon as possible, starting with their campaign promises: slashing taxes, boosting spending, rolling back pensions, immigration control and asking for a debt write-off.
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.