The euro is under a little pressure against the dollar this morning, dipping below the $1.12 level, as political tensions spike in Italy, but is holding its owning against the beleaguered UK pound, trading just above 92p this morning, with the latter little changed against the dollar at around $1.21. Italian bond yields have jumped on the back of political developments – by almost 25bps to circa 1.75% in the case of 10-year yields – but yields elsewhere are trading at their recent lows.
Italy could be facing fresh elections in October as relations between the two governing parties have broken down, probably irretrievably. If the government loses a confidence motion in parliament, which looks set to take place next week or the week after, the country’s president could ask the political parties to try to form an alternative government (which is seen as unlikely), but failing that elections will ensue. Opinion polls put the joint-ruling far right League party well ahead in the polls on circa 40%
US President Trump continues to exert pressure on the Fed to cut interest rates, saying the high level of US rates, “in comparison to other countries. is keeping the dollar high, making it more difficult for our great manufacturers to compete”
A first estimate of second quarter GDP growth in the UK will be released this morning. Stockpiling ahead of the original Brexit data of March 29th boosted growth in Q1, but there will be payback for that in Q2 while the underlying activity alo appears to have weakened amid heightened uncertainty, hence the consensus expects GDP to have been flat (i.e. zero growth) in the second quarter
It’s quiet on the data front otherwise with producer prices in the US the only other release of note