MORNING CALL: Italian Political Risk On The Rise

Italy could see early elections and this has rattled markets 
Euro may move below 1.11 against the dollar 
​Gold moves back above the 1500 mark 

European markets are trading lower because of the weaker than expected French industrial production number. It was as bad as it can be and this is the reason that red is the dominant colour across all markets.
Investors are also worried about the Italian political risk because of the government split and a strong possibility of early elections. The evidence of this can be seen in the Italian bond yields. It seems like things are going to get a lot more worse for the ECB before they get any better. This is the reason that we are seeing weakness in the Euro as well and it seems like that the currency may fall below the critical level of 1.11.


Another evidence of the risk off trade can also be seen by looking at the gold price which has moved above the 1500 mark. Clearly, investors do know that the Fed are nervous about the on-going trade war and the possible effects of this on the economic conditions of the country. The fact is that the Fed will have to adopt extreme dovish stance now and investors want to park their funds in a better place and nothing is more solid than gold.