Political tumult in the third- and fourth largest economies of Europe pulled down the 17-nation shared currency on Monday as policy makers with the region’s central bank prepared to convene later this week, Bloomberg reports.
The euro slipped against the world’s reserve currency as Spanish Prime Minister Mariano Rajoy was cited in a published report as accepting bribes, which he denied. Former premier of Italy Silvio Berlusconi, while attempting to reduce a four-year prison term for tax fraud, is closing the gap with front-runner Pier Luigi Bersani.
“Once the ECB fails to cut rates on Thursday, which is our view, the euro will be free to move higher again, but with the uncertainty surrounding the meeting the euro will likely weaken slightly or trade sideways,” senior FX strategist Adam Myers with Calyon told Reuters on Monday.
Ten-year notes issued by Spain increased 0.22 percentage points to push to their top level since mid-December. Ten-year bonds issued by Italy rose 0.07 percentage points.
Socialist Party members, who stand opposed to the People’s Party of Rajoy, called on the leader to submit his resignation after El Pais published the allegations and public support for the People’s Party is slumping.
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