Italian political crisis will continue to create uncertainty in Eurozone, Short EURUSD?

After reports that a possible future Italian government would seek debt forgiveness from European creditors, the market was unnerved and saw the Euro fall as much as half a percent to the dollar. This was the lowest since late December 2017.

Even though both the Fiver Star and La Lega parties eliminated any language calling for an exit to the euro, the Italian press reported that the idea of asking for 250 Billion sovereign debt forgiveness from ECB was surfaced.

The Euro had initially shrugged off the news from Italy but with the dollar restarting its rally, the euro succumbed to selling pressures.

• The new government, who are made up of political outsiders may add to the already chaotic country which makes investors flee due to uncertainty.
• Both the 5 Star Movement and League have previously floated ideas of a Brexit-style referendum on Italy’s EU membership, but dialed back their Euroscepticism ahead of the country’s March election. 
• If the economic situation in the region slowdown, it could escalate into chaos and wreak havoc in the eurozone.