Euro Rises as Fears About European Politics Wane

The euro rallied today as fears about Europe’s political problems receded, while optimism caused by the last week’s inflation data continued to support the currency.

Concerns about political turmoil calmed down as Italy got a new government after all, while the no-confidence vote in Spain resulted in a new prime minister. Experts remained worried, though, that the Italian government is populist and euro-skeptic, which is likely to cause clashes between Rome and Brussels in the future.

The Sentix Investors Confidence Index tumbled from 19.2 in May to 9.3 in June, far below the forecast level of 18.6. The economic expectations were even worse as the report revealed:

The sentix economic expectations literally collapse in June. At -13.3 points, expectations are at their lowest level since August 2012!

Interestingly enough, while the report mentioned a negative impact from the US tariffs, it put the most of the blame for the abysmal investor sentiment on the eurozone politics:

It appears that investors still hope that the world’s trade dispute with the US will not get out of control. Investors, on the other hand, are far less lenient with developments within the euro zone. The new government in Rome is very sceptical.

The eurozone Producer Price Index was unchanged in April from March, whereas economists had predicted an increase by 0.2%.

EUR/USD rose from 1.1656 to 1.1691 as of 16:54 GMT today, though it retreated from the daily high of 1.1744. EUR/JPY went up from 127.55 to 128.22, and its daily high was at 128.68. EUR/GBP jumped from 0.8728 to 0.8783.

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