The common currency Euro was close to striking a 2-week trough versus the U.S. Dollar early during the Asian trading session on the heels of a political crisis which appears to be brewing in Italy. Mario Monti, the Prime Minister, and a pro-Euro supporter, offered to tender his resignation, which if accepted, would exacerbate the uncertainty for the third largest Eurozone economy. Last week, Silvio Berlusconi, the previous Prime Minister, had said that he would no longer support Monti’s government.
As reported at 11:22 a.m. (JST) in Tokyo, the EUR/USD pair was trading at a low of $1.2880, a decline of 0.3% and close to a 2-week low hit last Friday when the pair struck $1.2876. More recently, the pair was trading at $1.2908, still off 0.2% from late trading in New York.
Euro support is further being eroded by the strong likelihood that the ECB will cut interest rates, which analysts predict will likely occur within the first quarter of 2013. Also weighing on the Euro is the likelihood that Germany will slip into a recession in the near future, a pronouncement made last Friday by the German central bank. Better than expected jobs data from the U.S. also helped to provide some support for the U.S. Dollar; as a result the U.S. Dollar Index, which gauges the greenback’s strength relative to a basket of weighted currencies, rose to 80.45 .DXY, a gain of 0.2% and close to the 2-week peak struck on Friday after the announcement of the jobs data.