This Sunday 25th September 2022, a coalition led by Giorgia Meloni’s Fratelli D’Italia (“Brothers of Italy” in English), is set to win the general election in Italy after Mario Draghi resignation as Prime Minister at the end of July. Giorgia Meloni is set to become the first female Prime Minister in the history of the country, leading the most right-wing government since the end of the second world war. Her coalition is formed in conjunction with Matteo Salvini’s Lega and Silvio Berlusconi’s Forza Italia, and polls yesterday gave her 41-45% of the votes, far ahead of the leftist coalition with 25.5-29.5% of the votes according to RAI. The election is set to offset the balance of power in Strasbourg with the new Italian coalition joining other far-right governments in Hungary, Poland, Sweden and Austria at the European Parliament.
Mario Draghi resigned on the 21st of July after failing to form a new government as his coalition collapsed due to rising prices with inflation and disagreements on appropriate measures to fight inflation and support households and businesses. Italy has seen 69 governments since the end of WW2, which each government last just over 400 days on average. By comparison, the United Kingdom “only” had 29 governments in the same period, with Liz Truss’ new government being the 29th.
Italy has seen inflation reach 8.4% in August, the highest in 36 years, which has put the manufacturing industry in contraction with a PMI of 48.0, in a country where manufacturing represents about 18% of the GDP. Growth for 2023 has already been forecasted at 0.6%-0.7% down from the previous 2.4%, but Draghi’s government has been able to launch a €68bn package to help businesses and families against rising costs, as well as strike deal with Algeria to diversify gas supplies away from Russia.
Cable plunged to its lowest levels since the Bretton Woods monetary system was abolished in 1972, as the dollar rallied strongly after the Fed’s interest rates hike and as the US economy enters recession, propelling investors to buy dollars as a safe haven asset. GBPUSD opened on Friday at 1.1414 and closed at 1.0858, however overnight trading on Sunday saw the pair plummet to 1.0294 before recovering back around 1.0750.
EURUSD followed a similar trend as the pair hit its lowest rate ever and fell well below parity. The pair opened at 1.0012 and closed at 0.9690 last week, marking a fall by -3.25%. Over the year, the pair has fallen by -15.97%.
GBPEUR saw the pound lose momentum as well as the BoE interest rate hike and the Chancellor’s mini-budget for the government failed to reassure investors. The pair opened at 1.1394 and closed at 1.1185, a -1.80% loss over the week. The pound also decreased against the Euro overnight, falling to 1.0795 before rebounding to around 1.11.