Sterling slumped to a record low on Monday, and a renewed selloff in British gilts pushed euro zone yields higher as the fall out from last week’s fiscal statement in Britain roiled markets for a second session.continued to put pressure on the financial system, though in a rare recent example of a news event having a smaller market impact than feared, reaction to Italy’s election result was muted.
The euro, which fell to its own 20-year low on the dollar on Monday was nonetheless up over 1% on the pound at 90.21 pence, having been as high as 92.29 pence early in the day, its highest since Dec. 2020. The carnage was not confined to currencies. Five-year gilt yields jumped more than 40 basis points to their highest since October 2008, sending Euro zone government bond yields higher.
“There are no big surprises. I expect a relatively small impact considering that the League, the party with the least pro-European stance, seems to have come out weak,” said Giuseppe Sersale, fund manager and strategist, Anthilia Capital Partners, referring to a separate right-wing party lead by Matteo Salvini.