Eurozone Politics Back In The Spotlight

The euro was steady at $1.3593 at 5:15 GMT on Wednesday morning after the dollar lost some of its strength on lower than expected consumer confidence data. The common currency was supported by news that German Chancellor Angela Merkel and the Social Democratic Party were working to strike a deal and put together a grand coalition. The two sides worked until late on Tuesday to draft an agreement which the 470,000 SPD members will have the opportunity to vote on. If a deal is reached and approved, the results will be announced on December 14th. Failure to form a coalition would put Merkel in a difficult position as she would have to choose between holding another round of elections, forming a minority government or making a deal with the Green party. In Italy, Silvio Berlusconi's Forza party announced that it would exit the nation's governing coalition just hours before an important confidence vote on Italy's budget law. Berlusconi has been threatening to leave the coalition since he was convicted of tax fraud and his parliamentary seat was put in question. The

reported that although Berlusconi has ended Prime Minister Enrico Letta's shaky alliance with the Forza party, Letta will still have enough votes to to make it through a confidence vote and get the latest budget approved. The fresh political turmoil served as a reminder to investors that the region is still treading on thin ice. Moving forward, most will be focused on economic data due out this week for clues about the European Central Bank's policy decisions at next week's meeting.