Euro Lower As Markets Focus on Italy

By: Barbara Zigah

As the trading week begins, the Euro continues to move lower against the U.S. Dollar following the markets’ response to Greek Prime Minister George Papandreous’ pledge to resign and allow the formation of a new coalition government. Traders switched their focus from Greece to strategically important Italy, and its government that is also in the throes of upheaval. As reported at 4:30 p.m. (JST) in Tokyo, the Euro was trading against the greenback at $1.3759, a decline of 0.2% and off the intraday high of $1.3839. Analysts say there is some support at around $1.3725 and resistance near $1.3831.

In Italy, the Prime Minister, Silvio Berlusconi, is being threatened by “rebel” members of his own party. This interparty rebellion comes at a point in time when Berlusconi most needs Parliamentary support for a vote tomorrow on public finances. During last week’s G20 summit, Italy agreed to allow the E.U. and IMF monitor the country’s finances, but Berlusconi, in a comment reflecting typical conceit, said that he could cancel those inspections “whenever he wanted.” Italy’s large economy, 3rd in the Eurozone bloc, poses a much more significant fiscal risk than Greece, and many investors worry that it could be too large for the current EFSF to bail out.