Euro Lower on Italian Budget Worries
The latest political news centering on Italy's latest budget pushed the common currency Euro to a fresh 1-week trough on concerns over political tensions within the Eurozone. As a result, the US Dollar Index pushed higher, even after Thursday's near 2-month peak; the Dollar Index is comprised of the weighted average of the Dollar's peers, including the Euro. The European Commission complained that the latest Italian budget violates EU budget rules, with government spending and sovereign debt both increasing which would result in the Italian government's inability to reduce public debt in accord with EU regulations.
As reported at 11:00 am (JST) in Tokyo, the EUR/USD was trading at $1.15, down 0.01% and off the session trough of $1.14510. The EUR/GBP was trading higher at 0.87986 Pence, a gain of 0.01%, moving away from the session high of 0.88020 Pence.
Bond Markets Respond Swiftly to Italy PM
Italy's response to the European Union comments was not well taken by financial markets. The Prime Minister essentially defended his government's right to establish the free-spending budget. The response in the bond markets was to broaden the yield gap between Germany's and Italy's 10-year notes, which was the widest level seen in 5½ years. Some currency strategists see the EUR/USD breaking at the next support level, on its way down to $1.13.