Traders’ relief over Italy’s budget and Italian borrowing costs’ drop were the main reasons behind euro rally. The euro rally was also encouraged by EU-friendly comments by Italy’s Deputy Prime Minister. Luigi Di Maio stated that the Italian government was ready to sit down with the EU over the Rome’s budget.
Italy will publish its letter responding to EU Commission criticisms of Italy’s 2019 budget at 10:00 GMT.
Calm in the market came following Moody’s move to cut Italy’s credit rating by one notch on Friday. Further, the rating agency switched the country’s outlook to stable.
In addition, Chinese stimulus helped offset broader political worries.
Other news – Bits & Pieces from Reuters
Sterling slipped on Monday. The prickly Irish border issue and disagreements within the UK ruling party over Brexit overshadowed signs that Britain and the EU had settled most of their differences. With 95% Brexit agreement almost done, the British Prime Minister repeats rejection of EU proposal on Northern Ireland.
Bijan Zanganeh, Iranian Oil Minister: Iranian oil output cannot be replaced by other oil producing countries if Tehran is hit by sanctions by the USA.
President Trump announced that Washington would withdraw from a landmark Cold War-era treaty that eliminated nuclear missiles from Europe. The reasoning is that Russia was violating the pact. Now, Moscow wants U.S. to explain planned exit from arms treaty according to RIA news agency.
Forex – Commodities – Euro rally
Forex markets were mainly quiet, although the more positive tone at the start of the week cheered forex traders.
The dollar dropped 0.3% against its major traded rivals. A hawkish FED and signs of continued strength in the U.S. economy remain key drivers.
The dollar edged higher 0.2% versus the Japanese yen. The yen had benefited from rising risk around Brexit, the Italy budget plan and trade tensions.
The Australian dollar, often considered a barometer for global risk appetite, traded flat.
The British pound had slipped 0.2% to $1.3039, as the greenback climbed back into positive territory. Against the euro, the pound fell 0.25% following Moody’s decision to hold off cutting Italy’s credit rating outlook to negative.
The euro which has often fallen this year when Italian government bond yields have spiked higher rose 0.3% to $1.1550. The single currency was also 0.2% higher against the Swiss franc and 0.25% versus sterling.
Oil prices held close to $80 on Monday lifted by a diplomatic crisis between Saudi Arabia and the West. Only two weeks left before U.S. sanctions potentially obstruct Iranian crude supplies. Brent crude futures rose by 16 cents a barrel to 79.94$ a barrel. U.S. crude futures rose by 10 cents a barrel from their last close.
Sources: Reuters, CNN money, BBC
PLEASE NOTE The information above is not investment advice.