EUR/USD is unchanged in the Monday session. Currently, the pair is trading at 1.1697 down 0.01% on the day. On the release front, the focus is on the service sector. Eurozone and German Final Services both dropped in May, but met expectations. Eurozone retail sales remained unchanged at 0.1%, but this missed the forecast of 0.5%. In the US, the ISM Non-Manufacturing PMI is expected to rise to 57.9 points. We’ll also get a look at JOLTS Job Openings, which is expected to drop to 6.49 million.
The euro remains calm this week, as Italy appears to have wrapped up months of political turmoil, as the country finally has a government. The new coalition is made up of two euro-sceptic parties, the League and the Five-Start Movement, which is likely to result in friction between Rome and the European Union. After President Sergio Matterella vetoed the choice for finance minister last week, it appeared that the country might be headed for another election and more political uncertainty, and Italian stocks and bonds dropped sharply. However, the crisis is over after the prime minister-elect, Giuseppe Conte, found another candidate for the key finance post. The new government has said it will drastically reduce immigration and raise spending, planks which could put it at odds with EU policy. Although the League and Five Star Movement have not issued any threats to withdraw from the EU or even hold a referendum on EU membership, there is plenty of concern among investors that the fourth largest economy in the eurozone is being steered by a government with a populist, anti-establishment platform.
Is a new global trade war brewing? There are some ominous signs that the US and some major trading partners are headed in that direction, after the Trump administration slapped tariffs on the European Union, Mexico and Canada on Thursday. The U.S had granted all three trading partners a temporary extension but cited insufficient progress on trade talks as the reason for the tariffs. This has triggered promises of retaliatory tariffs on US products, and tempers were short at the G-7 meeting of finance ministers in Canada on the weekend. U.S Treasury Secretary Steve Mnuchin faced sharp criticism from other finance ministers over the tariffs. The leaders of the G-7 meet in Canada on June 8, and European leaders want to take trade and try to find some compromise with the U.S in order to remove the tariffs.
