Italian elections provide no clear winner
Political uncertainty is set to grip Italy for the next few months after no party or coalition received enough votes to rule on their own.
With the votes still being counted, the anti-establishment Five Star Movement is set to win 32% of the vote and become the largest single party in parliament. A coalition of right-wing parties is projected to collectively win 37% of the vote, with the anti-immigrant ‘League’ making the most gains.
The result will have alarmed many at the E.U. as euroskeptic parties did surprisingly well. The leader of the League claimed, “the euro is the wrong currency and it was a big mistake getting in it.”
Trade war on the horizon
The dollar reacted badly last week to President Trump’s unexpected proposal to slap tariffs on imported steel and aluminum, and his repeated calls for a trade war. This was met poorly by foreign leaders who responded by claiming they would impose similar tariffs on U.S. exports. Trump’s tweets and comments will be closely monitored this week.
With very little economic data today and tomorrow, the focus for the dollar will be on New York Fed president William Dudley, who is speaking tomorrow. In his previous comments, he discussed the possibility of four, 25-basis-points rate hikes in 2018, which helped strengthen the dollar last week.
May’s speech met with mixed reaction
The back and forth between the U.K. and E.U. over Brexit terms continued with the Prime Minister setting out her stall for trade and the border with Republic of Ireland.
Although it was good to get more clarity on the UK’s position, the speech was not well received in Europe. The German leader of the biggest party in the European Parliament, Manfred Weber, said he was “more concerned” after the speech that the EU and UK would not reach an agreement.