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Italy will probably have a new government on Monday, April 29th, more than two months after the elections. Enrico Letta will lead a government which will also include people from Berlusconi’s party, as well as non politicians.

This news will probably boost the euro in the new trading week. However, this government may have a short life, and so could a euro rally: the ECB convenes on Thursday and could cut the rates.

The government will include  Fabrizio Saccomanni a economy minister, former European commissioner Emma Bonino as foreign minister and Berlusconi’s  Angelino Alfana as interior minister and deputy PM. It will be interesting to know what Berlusconi got for himself.

The ECB could cut the the interest rate and in a more remote case hint about or cut the deposit rate to 0%. See the ECB preview for more. The speculation about the ECB’s moves moved the euro and are likely to have more impact on the single currency than the initial boost from the Italian news.

For more, see the EURUSD forecast.