Euro Enjoys Major Recovery After Failure Of Italian Referendum 0 1013

Italy’s plans to reform the constitution of the country was proposed by the Italian prime minister Matteo Renzi. However, the country voted against it and the prime minister accepted his defeat. The proposal of the referendum and its subsequent failure has impacted Euro in a major way.

The proposal of referendum caused Euro to weaken and it reached a 21-month low against the US dollar. Immediately after the failure of the referendum, Euro, however, recovered quickly almost overnight. Due to political uncertainty of the Euro Zone, euro decreased by 1.4% as it reached $1.0505. However, after the Italian results became public, the currency rebounded and it was trading down only by 0.1% closing at $1.0650.

The failure of the referendum was expected, but the size of No vote was shocking. 59.1% of Italians voted No and it was far from the forecast. However, the uncertainty for the Euro zone is not over yet.

When Renzi resigns, there will be an early election next year. There is a possibility that anti-euro party may come into power. This can be a major blow to the European Union which is still facing uncertainty due to the Brexit vote. Initially, the European Central bank was prepared to increase purchases of Italian government bond if the market movement initiates sell-off. However, the traders found that the bank didn’t take any action in the market so far. A meeting is scheduled for European central Bank on Thursday, but there won’t be any radical change for Euro even if a full-blown crisis emerges.

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