Following a tumultuous last week, this week is starting off with the markets relatively calm. The dollar is giving back some of its gains to the euro and pound as the risk appetite increases. Brexit and the U.S. government shutdown are still looming in the background.

EUR/USD advances on market calm

There’s more optimism in the global markets Monday morning, especially in the Eurozone as Italy reaches a new budget proposal.

The Italian populist government came to an agreement on a new budget to send back to the European Commission, which was threatening the country with fines over its refusal to adjust its 2019 budget – specifically a 2.4% deficit number.

The new plan, which still needs approval, lowers the deficit to 2.04% of GDP.

EUR/USD climbed its way from 1.1307 to 1.1355 Monday despite worse-than-expected inflation data out of the Eurozone. The consumer price index for the month of November grew 1.9% YoY compared to estimates of 2% and the core CPI declined 0.3% MoM instead of the only 0.2% loss expected.

As it’s the last week before the Christmas holiday next week, we’ll see if the calm continues or if there is a last-minute rush to get some business done. The EUR/USD pair will at least fluctuate based on the Federal Reserve’s interest rate decision Wednesday.

Brexit vote future uncertain

After halting the parliament Brexit vote last week, Theresa May’s government is now saying there won’t be a vote this week. But they also said they weren’t going to postpone last week’s vote.

There are also increasing calls for a second Brexit referendum. May is addressing U.K. lawmakers today to tell them why that is a bad idea and goes against what the British people already asked for.

Despite the uncertainty, the pound was able to advance against the dollar Monday, climbing from 1.258 to 1.264.

Shutdown deadline

The U.S. government is once again facing a possible shutdown before the year ends.

While the partial shutdown would only impact some government agencies, President Trump and Congress have until Saturday to come up with legislation to fund the government and keep it open.

President Trump wants funding for a border wall with Mexico included in the legislation, but Democrats are not willing to give him the entire $5 billion he wants.