The euro currency declined 0.2% against the US dollar on Monday, as it was dragged down by the Italian political turmoil with the Italian Prime Minister Enrico Letta facing a confidence vote on Wednesday as Silvio Berlusconi’s party resigned from the cabinet.
The euro declined 0.21% to $1.3494 against the US dollar as of 7:56am GMT, while against the Japanese yen; the euro fell 0.73% to ¥132.19 against the yen and edged down 0.30% lower to £0.8360 versus the pound sterling at the same time.
“Several European Central Bank (ECB) members stressed that they are ready to offer another LTRO (long-term refinancing operations) if needed. However, as such dovish remarks combined with the Fed’s less hawkish monetary policy stance dragged market rates already lower, we see little scope for the ECB to become more aggressive as soon as this week,” analysts from Credit Agricole wrote in a note on Monday.
European Central Bank (ECB) press conference is scheduled Wednesday.
Over the weekend, Silvio Berlusconi announced that his ministers were leaving the People of Liberty party due to the country’s Prime Minister’s coalition government as he called for new elections.
Last week, Italy’s Finance Minister Fabrizio Saccomanni announced he would step down if the coalition government violates European Union deficit limits in favor of tax cuts, “Promises must be kept or I am not staying,” said Saccomanni.
Mario Draghi’s Speech
On Wednesday, the rate decision is expected to be released from the European Central Bank. Investors will be closely watching the press conference for any hints the President of ECB Mario Draghi could drop.
The US Congress is expected to increase the debt limit, while pointing out that Obama’s administration has faced the prospect of bankruptcy six times in the past three years.
Treasury Secretary Jack Lew notified Congress policymakers that the government will exhaust its borrowing authority by October 17. Investors are worries over the US possibly facing a government shutdown as soon as October 1, first day of the new fiscal year.
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