After yesterday`s free day in the United States and the United Kingdom, the currency market returns to normal trade, although – according to the traders quoted by Bloomberg – liquidity during the Asian session was still low and the turnover was not significant.
After returning to the market, investors will have to respond to new information that came from Italy and could have a negative impact on the single currency yesterday. If we have to break some restrictions, such as 3 percent (deficit to GDP) or 130-140 percent (debt to GDP ratio), we are ready to do it. Until we reach 5 percent unemployment rate, we will spend as much as we should, and if someone complains in Brussels, we will not worry about it – Italy's Deputy Prime Minister Matteo Salvini said in mid-May, quoted by the Reuters agency.
As a result, yesterday there was information that the European Commission was considering a proposal to start disciplinary proceedings against Italy in the next week due to lack of debt reduction, which could open the way to a fine of EUR 3.5 billion (USD 4 billion) – reported Bloomberg agency, citing a person who knows the case. Thus, any signs suggesting a deepening of the conflict between Italy and the EU could lead to the weakening of the euro. However, if concerns about Italy are more serious, they may trigger a negative sentiment, which in turn could affect the Japanese yen or Swiss franc.
Meanwhile, on the trade war front, US President Donald Trump said on Monday that he saw a preliminary trade agreement with Japan by August, but Japan did not confirm any talks. However, regarding the trade agreement with China, President Trump said yesterday that the US is not ready for a deal with China.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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