The intrigues of Italian politics are arrayed to be a key driver for the euro after May 26, when the results of the European Parliament elections are known. Italian bond yields ascended higher in the midst of last week, driving the gap between the yields on German Bunds and Italian debt to its broadest level this year. The uneasiness came after Italy’s deputy Prime Minister, Matteo Salvini, said that Rome should allow its fiscal deficit to rise above the EU’s upper limit.
It is a posture that suggests is liable to result in confrontations between Italy and the European Commission when the two parties initiate discussions over the country’s new budget following the elections. Economists think the European elections could determine the balance of power within Italy’s coalition government. A result that favours right-wing representatives could lead to a more confrontational approach towards the EU. A strong showing from right-wing candidates could also force a new general election.
Some analysts consider the hazard of further disruptions in Italian politics, connected with apprehension over Brexit and Chinese growth, will continue to keep the euro on the back foot. With the estimate for the single currency, expecting it to trade at $1.13 by the end of 2019. The euro is presently trading around $1.12.