The Euro plummeted to a 20- month low against a basket of currencies, following the resignation of Italian Prime Minister Matteo Renzi at the weekend. The currency moved to over 1.20 against the pound in the immediate aftermath.
Renzi was defeated in Sunday’s referendum, as the constitutional changes that he suggested were rejected. Voters decided that they did not want to proposals to cut the size and power of the senate to streamline parliament.
The ‘no’ campaign was thought to have lead by over 20%. Aside from the political instability, analysts expect many of the country’s banks to experience further turmoil. Shares have already dropped by several percent in value over the last few days. The country’s lenders are already burdened with over 360 Billion Euros in non-performing loans, and are particularly vulnerable to market shocks.
A banking crisis in the Eurozone’s third largest economy is likely to pose a threat to the single-currency.
In other news, the Prime Minister of New Zealand also unexpectedly announced his resignation this morning and the NZD weakened as a result.
The Brexit battle will resume this week as the attorney general takes the Government’s case to the Supreme court for a four-day hearing. They will present their argument that they do have the right to trigger the article 50 in accordance with May’s schedule, without Parliamentary approval.
Incidentally, eyes will also be fixed on the European Central Bank’s policy meeting on Thursday, during which they’re expected to announce a six-month quantitative easing extension.