EUR/USD continues to trade quietly. In the Monday session, the pair is trading at 1.1743, down 0.27% on the day. The On the release front, German markets are closed for Whit Day, and there are no German or eurozone indicators. In the US, the sole event is a speech from FOMC member Rafael Bostic.
The Italian election back in March was inconclusive, and the new political landscape could spell bad news for Brussels. Two euro-sceptic parties, the Lega Nord and the Five Star Movement have reached an agreement and appear poised to form the next government. The platform issued by the parties call for increased deficit spending and a review of European Union fiscal rules. So far, neither party has called for a referendum on Italian membership in the European Union or demanded that the EU cancel the portion of Italy’s debt that it holds. Still, Italy is the third largest economy in the EU (with Britain heading out the door), and any moves which will put Italy on a collision course with the EU could have a negative impact on investor sentiment towards the euro.
There was a dramatic development in the China-US tariff battle on Sunday, as US Treasury Secretary Steven Mnuchin said that the trade war was being ‘put on hold’. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants had traded stiff tit-for-tat tariffs in recent weeks, worth billions in trade. These moves had raised fears of a bilateral trade war between the two largest economies in the world. The respite in tariffs means that the US can sit down with the Chinese and discuss the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China. The news that the sides had backed down sent stock markets higher, and traders will likely be greeted with gains when European markets reopen on Tuesday.