Euro plummets down to a 20 month low this Monday after Italian Prime Minister Matteo Renzi announced that he concedes defeat in the referendum over his plan to reform the constitution. The euro was quoted down 1.03% to 1.0553; the decline brings concerns over the health of Italy’s banking system.
Another possibility most of the market players see is that the euro might plummet to a low of $1.0457 or a drop as much as 1.4 percent which is a break below its 2015 march low. This would mean that the euro will be at its lowest level since 2003 and might open a way for a test of $1 or parity against the dollar.
According to recent reports, all of Italy’s focus is geared towards politics after the Prime Minister Matteo Renzi resigns, further, if no one can form a government then the country will be forced to hold an election and that would be a real mess and risk for the market.
The outcomes might sway out potential investors and old investors alike, and the distrust in the euro and can be seen as a sign of rising anti-establishment sentiment in the heart of Europe. The referendum also came in a bad time as Italy’s fragile banking system needs to raise 5 billion euros by year-end to evade the risk of being wound up; this is according to the country’s third biggest ailing lender the Monte dei Paschi di Siena.
EU VS USD
While the dollar has been on a steady growth last week, a noted head start for the week for the dollar today is brought by the growing U.S. economy added more jobs than forecast last month wage growth declined. It is the first time that wage slips after nearly a year though it is blamed for the drop in average hourly earnings on a calendar quirk according to recent economist reports.
Reports from the Labor Department revealed that the U.S. economy added 178,000 jobs in November from the previous month while the unemployment rate drops to 4.6 percent, the lowest since 2007.
On the other hand, New Zealand’s Prime Minister John Key, who won praises for his economic stewardship after the global financial crisis, surprisingly announced his resignation causing a 1 percent to $0.7075 fall on the New Zealand dollar.
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