- Italian populist anti-establishment parties perform better than expected
- SPD members voted in favour of a grand coalition with Merkel’s CDU/CSU ending the long-standing political gridlock
- Australian dollar trades lower following disappointing inventories boding not well ahead of GDP later this week
The Italian election along with the SPD voting were the major events during the weekend, however, the euro has little responded thus far. In terms of the Italian election the 5Star Movement is expected to win the Sunday’s voting but without a majority needed to form a government on its own. Democratic Party is likely to finish at the second place ahead of Northern League and Forza Italia. How could a coalition look like? Well, the 5Star Movement led by Luigi Di Maio and the far-right Northern League party have ruled out the possibility of a post-election pact nevertheless it seems to be the only option on the table right now. The latest projections show that the two parties would hold as much as 355 seats in the 630-seat lower house of parliament and 168 seats in the 315-seat upper house. It does not look favourably for the euro as both parties are decisively euro-sceptic.
If the two above-mentioned parties do not agree on coalition talks (even as they have ruled out to do so it does not mean a definitive debacle given what we have seen in Germany of late) a stalemate is another option, and then Italian President Mattarella could choose to leave in place the current government setting the stage for new elections. Let us remind that after a stand-off following the election in 2013 it took more than two months to forge a government.
While the Italian election seems to be slightly negative for the shared currency, it could be healed to some extent by the promising voting among SPD members who agreed during the weekend on a coalition with Merkel’s CDU/CSU (a so-called grand coalition). The fallout ends a period of political mayhem in Germany which has been struggling to form a government since Autumn. Consequently, Angela Merkel secured its fourth term in office, and she is expected to be reappointed on 14 March.
The euro is heading slightly lower in early trading after a good start on Sunday. The pair respected its short-term resistance zone and therefore one may count on an extended, but probably short-lived, move to the downside. Source: xStation5
Apart from the two political events in Europe there was a notable macroeconomic reading from Australia showing lower than expected inventories. They grew 0.2% qoq missing the consensus at 0.5% qoq while the prior value was revised down from 0.2% qoq to 0.1% qoq. All in all, it does not bode well ahead of the GDP release scheduled for this week.
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