Political turmoil in Italy is impacting the markets and currencies across the globe with the dollar reaching new highs against the euro and the pound. The risk off sentiment and falling U.S. Treasury yields has the dollar slipping against the safe-haven Japanese yen. Meanwhile, U.S. and North Korean officials are attempting to salvage a meeting between Donald Trump and Kim Jong Un.

Italian woes weigh on euro

Political turmoil in Italy has many in Europe and across the globe worried about the country’s financial future and how it could impact the global economy.

President Mattarella rejected the coalition populist government’s pick for finance minister – euroskeptic Paolo Savona – instead appointing Carlo Cottarelli and then asking him to form a new government and hold elections as soon as the fall.

Leaders of the Five Star and League parties were outraged by the news and promised political backlash, even suggesting impeachment of Mattarella.

The EUR/USD pair plunged to a 10-month low of 1.151 Tuesday morning, since rising back up around 1.156 after Five Star leader Luigi di Maio said he has never wanted to exit the euro.

There is little economic activity to move the pair today.

The troubles in Italy are reaching beyond the Eurozone. The GBP/USD pair also dipped on the news, reaching as low as 1.320. Cable is up around 1.329 just before 9 a.m. EST.

Summit salvaged?

There are signs this morning that the summit between President Trump and Kim Jong Un might be back on as U.S. officials and a top North Korean official meet.

When President Trump sent a letter last week canceling the June 12 meeting due to what he saw as anger from the North Korean side, he left the door open for a meeting to still happen if North Korea wanted it to. On Sunday, Trump confirmed in a tweet that U.S. officials were in North Korea making arrangements for the meeting.

Kim Jong Un’s right-hand man, Kim Young Chol, is also on his way to New York to prepare for the June 12 summit. Trump tweeted that this was a “solid response” to his letter.

This news is helping the dollar hold up against a rising safe-haven Japanese yen. The USD/JPY pair was dropping overnight as U.S. Treasury yields fell. The 10-year yield fell below 2.8%. The pair trades around 109.0.

The short week ahead

Trade continues to be a leading theme this week as Commerce Secretary Wilbur Ross holds two meetings with counterparts overseas.

Ross will meet with European Union trade chief Cecilia Malmstrom on Wednesday in Paris, and then travel to Beijing on Saturday to talk with Vice Premier Liu He.

On the economic front, U.S. annualized Q1 GDP is due Wednesday, as well as core personal consumption expenditures.  The Bank of Canada will make its interest rate decision Wednesday, too.

On Thursday, Euro consumer price index data is due followed by U.S. weekly jobless claims.

The week ends with the U.S. labor report, including nonfarm payroll data.