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FOREXNEWSLETTER

Euro Up 0.3%, Recovers From 21-month Low

The Euro, on Monday, November 5, recovered after dropping to a 21-month low late Sunday, as investors appeared to move past the initial shock of a “no” vote in the Italian constitutional referendum and the resignation of Italy’s prime minister.

The euro has fallen sharply since President-elect Donald Trump’s unexpected victory in the Nov. 8 U.S. presidential election.

It’s presently trading just above lows seen in the early 2000s, shortly after the currency was launched, MarketWatch reports.

One euro EURUSD, +1.0218% bought $1.0701 in recent trade, up 0.3% from $1.0665 late Friday in New York. The currency traded as low as $1.0505 late Sunday, its lowest level since March 16 2015.

On Sunday, Italian voters overwhelming rejected a slate of constitutional reforms. Prime Minister Matteo Renzi, who has led the country since 2014, announced he was stepping down, as was widely expected.

“Clearly the referendum was rejected but that doesn’t mean efforts to shore up the banking sector, and fix problems with competitiveness and the country’s lack of economic efficiencies will end,” said Valentin Marinov, chief G-10 currency strategist at Crédit Agricole.

Not only was the euro recovering, but peripheral bond spreads moved lower following a knee-jerk increase, which was seen as a sign that bond investors had also embraced a more sanguine view of the prospects for the Italian banking sector, Marinov said.

The yield on the 10-year Italian government bond TMBMKIT-10Y, +4.67% fell 2.4 basis points to 2.015%, while the yield on the German 10-year TMBMKDE-10Y, +18.92% rose 5.8 basis points to 0.339%. Earlier, the spread between the two yields had reached a two-year high.

However, shares of Italian banking stocks held on to their initial losses, with shares of UniCredit S.p.a, Italy’s largest lender, down 5.6% at €1.97

S&P 500 futures ESZ6, +0.42% pointed to a moderately higher open for the U.S. stock market, while European stocks SXXP, +0.56% advanced as early losses faded.

Italy’s FTSE MIB I945, -0.21% opened 2% lower. Italian bank stocks IT8300, -2.19% were down more than 3%

 

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