After weeks of being without a government, the two populist parties in Italy finally formed a coalition government after much wrangling about who was going to be Economy minister. All the uncertainty in Italy caused fear in the markets and revived memories of the 2012 Eurozone crisis. Why? Because Italy is the 3rd largest Eurozone economy and is heavily indebted!
Meanwhile in Spain, Prime Minister Mariano Rajoy is voted out of office in a no-confidence motion and was replaced by Socialist Pedro Sanchez, who is seen as more "pro-European". EUR/USD showed no reaction to this news as it was expected and continued to trade above the $1.16 level after making a strong recovery off a 10-month low that was hit earlier in the week.
In other news, are trade wars back on the table? President Trump imposed tariffs on Canada, Mexico and the E.U. effective June 1st on steel and aluminium imports to the U.S. Naturally, the loonie and the Mexican peso tumbled on the news.
The U.S. jobs report for May beat forecasts in all areas – the actual NFP number, wages and the unemployment rate. The unemployment rate dropped to 3.8% from 3.9%. while the number of jobs created came in at 223k from April’s revised 159k. The dollar rallied on the data especially against the yen, rising above 109.70.