Italian voters rejected proposed constitutional changes in a national referendum yesterday. The vote has forced the resignation of Italian Prime Minister Matteo Renzi and sent a tremor across the Eurozone. The Italian vote is the latest setback for advocates of wider European integration and will give the ECB real cause for concern. Elections are expected in France, Germany and the Netherlands next year and the rise in populist anti-EU sentiment is worrying investors. The euro showed a fall of 0.95% trading at 1.0563 against the USD early this morning. It also fell against sterling, the Swiss franc and the yen.
Asian Markets Jittery Overnight
Asian markets reacted sharply to the Italian referendum vote with a sudden drop in share prices. This was a reflex reaction to the news, mainly caused by worries about the effect on the global banking system. Traders recovered some of their confidence and the initial move towards safe haven assets was not sustained. Nonetheless, the Nikkei, hang Seng and Kospi were all down, as was the ASX 200. The US dollar gained against most Asian currencies, but slipped against the yen as traders looked for safer investments. The kiwi also fell following the surprise resignation of Prime Minister John Key. Two Prime Ministerial resignations in 24 hours are highly unusual and some investors may be wondering if this is a taste of things to come.
Coming Financial Events
Today’s financial calendar is fairly light. Traders will be watching the euro closely as the markets absorb the implications of the Italian vote. The British pound may also be volatile as the UK Supreme Court considers a challenge to the Brexit referendum decision. Analysts will be paying particular attention to the Eurozone GDP figures tomorrow. Bad growth figures could see the euro take another hit. The Aussie dollar is also likely to be volatile early on Tuesday morning when the RBA announces its interest rate decision.