Euro flat ahead of Italian vote

The euro is broadly unchanged versus the US dollar, ahead of a vote of confidence for the Italian prime minister.

The strength of the Italian coalition has been called into question recently, as some senior members of the People of Freedom party urge other members to defy Silvio Berlusconi and back Enrico Letta.

With the third largest economy in the eurozone, Italy’s continued political instability is hampering the nation’s ability to reform its economy. If the coalition survives the vote of confidence, EUR/USD could trade higher.

The European Central Bank is due to make its interest-rate decision at 12.45pm (London time), with the consensus that rates will be left unchanged at 0.5%. A press conference follows the announcement at 1.30pm (London time), where traders will listen for any clues as to the ECB’s future intentions.

The continued partial shutdown of non-essential state jobs in the US is weighing on the dollar, though the shutdown is unlikely to have an impact the US' credit rating. However, the situation may put more pressure on debt ceiling talks which will come to a head in mid-October.

Spot FX EUR/USD (DFB) chart

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