The European Single Currency, euro, on Monday, May 21, fell half a percent on the day to $1.1717, its lowest since late November, as a sell-off in Italian bonds spread to other peripheral bond markets in Europe.
The common currency was also hit after two anti-establishment parties pledged to increase spending in a deal to form a new coalition government.
In the euro’s case, concern over fiscal laxity from a new coalition government in Italy has also weighed on investors’ minds, at a time when expectations of an interest rate increase by the European Central Bank have been pushed back to mid-2019.
“The shift to looser fiscal policy and a less favourable stance towards the EU is reinforcing selling pressures on the euro in the near-term,” MUFG strategists said.
Elsewhere, sterling slumped half a percent to $1.3412, its lowest since Dec. 28, as markets prepared for data this week that may decide whether the Bank of England will raise interest rates at all this year.
