EUR Direction Remains Unclear After Populist Italian Election

Euro News and Talking Points

- Italy is set for weeks of negotiations after the weekend’s general election proved inconclusive.

- The anti-establishment Five Star Movement (5SM) the largest single party.

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EURUSD Likely to Remain Volatile After Eurosceptic Surge in Italy

The EUR is expected to remain volatile, with its short- to medium-term direction unclear, after this weekend’s Italian general election produced a centre-right surge with a hung parliament expected when the final results are in. At the time of writing, the 5SM party is expected to poll over 32%, making it the largest single party, while the Matteo Renzi’s ruling Democratic Party was projected to poll just 23.1%. Overall centre-right parties have polled over 50%.

While the outcome – a hung-parliament - was expected, the make-up of the vote may have long-term consequences for the single-bloc’s currency. With over half the voters behind centre-right and populist parties, the markets will be watching closely any coalition building. While the 5SM and the far-right Northern League have already said that they will not go into coalition, any weakening of this position would cause serious concern in Brussels and weigh heavily on the EUR.

The single-currency is already under pressure after US President Trump raised the spectre of trade tariffs last week, while the EU is still negotiating with the UK post-Brexit EU/UK trade terms.

EURUSD Price Chart Daily Time Frame (September 2017 – March 2, 2018)

Chart by IG

What’s your opinion on EURUSD and the Italian election?Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at nicholas.cawley@ig.com or via Twitter @nickcawley1.

--- Written by Nick Cawley, Analyst