2018.06.0406:21:00UTC+00Euro Rises as Italy Geopolitical Risks Ease

The euro advanced on Monday after political tensions in Italy dissipated, powering a rebound in appetite for risky assets as concerns about a rising trade war between the U.S. and other major economies went into the background.

A better-than-projected U.S. jobs data on Friday emphasized the strength of the U.S. economy and further strengthened the case of a Federal Reserve interest rate hike this month. It also boosted expectations of a fourth hike this year. These factors have driven a recent rally of the dollar.

But with indications of less uncertainty in Italy as it establishes a new government, the euro was able to recover some gains.

The rally in stock markets also helped investors to dismiss worries that trade disputes among the biggest economies in the world will affect growth.

German Chancellor Angela Merkel's weekend statement that Germany was inclined towards the European Monetary Fund to resolve issues of the eurozone sovereignity debt sustainability also helped to boost the mood of investors at the beginning of the week.

The euro climbed by as much as a half percent to $1.714, moving away from the 2018 lows of $1.151 hit in the previous week. ING analysts said the worst times for the euro seemed to be over, at least in the short term.

But many analysts warned that events in Italy, where the government between two anti-establishment parties says it will boost spending, lower taxes, and question the European Union's fiscal rules, will limit notable euro gains.

The dollar edged down on a broader manner, its index versus a basket of currencies sliding 0.3 percent to 93.892. It also pared some of its earlier gains versus the yen.

The Australian dollar jumped 0.8 percent to its peak level April on better risk sentiment and positive economic data indicating solid company profits and an increase in retail sales. The Aussie advanced to $0.7630.

The New Zealand dollar also rallied 0.4 percent $0.7016 while the Canadian dollar edged down half a percent.