Euro tumbling against world`s currencies after Italian Prime Minister Matteo Renzi announces his resignation
After a pernicious defeat in the Italian constitutional referendum, Prime Minister Matteo Renzi announced his resignation.
After his announcement, the European shares opened lower and the Euro tumbled on Monday.
Prime Minister Matteo Renzi promised that he will resign if his plans of reforming the Italian constitution won't succed, and after his defeat, the Italian Prime Minister kept his promises.
The event made the euro go express down whill. Political uncertainty was raised in the Euro zone.
Kyosuke Suzuki, Director of Forex at Societe Generale, declared that "The focus now is on Italy's politics after Renzi resigns. If no one can form a government and the country is forced to hold an election, that would be a real tail risk for markets".
On Tuesday, when Matteo Renzi is supposed to offer his resignation, President Sergio Mattarella has to decide if he will ask Renzi to reconsider his decision or to open consultation for a new prime minister for Italy.
The events were so radical that made the euro fall down to its lowest level since 2003. Even though the investors and market specialists say that the euro will soon go on a level against the dollar at $1, for now euro is blocked at $1.0566.
The Italian referendum came at the worst time for Italy's banking system, which is already very sensitive. Monte dei Paschi di Siena has to raise 5 billion euros by the end of the year to avoid the risks of being injured.
On the other hand, Minori Uchida, currency analyst at Bank of Tokyo-Mitsubishi, said that he doesn't think that the Euro will have such a great fall as expected in the near future. "The 'No' vote was priced to a certain extent in advance. So I do not expect a free fall in the euro in the near term".
On the long term, on the other hand,he added that "But in the long run, this will delay progress in Italy's efforts to get rid of banks' bad debt and is likely to widen the yield spread of German Bunds and Italian bonds".
The results of referendum might affect the investors' confidence in the Euro ahead of the election next year in Germany, Netherlands and France.
On a general image, the Euro went downhill with more than 1% to 119.70 against the Chinese Yen. Against the British Pound, Euro hit its lowest level since July to 0.8315.
The American dollar went back to its last week's high levels and reached 113.50 against the Chinese Yen on Monday.
The New Zealand dollar reached almost one dollar in its fall, down to $0.7075. New Zealand's Prime Minister John Key announced his resignation taking everyone by surprise.
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