Italian pres. Mattarella: New elections should not be taken lightly

Italian president Mattarella has announced that new elections should not be taken lightly and that some parties have said they are working towards a deal, but need more time.

Key comments:

• Parties will be given more time.
• deadline for talks is Tuesday.

Italy's president has extended the time needed for a new government to be formed.

Sergio Mattarella has been speaking to key political leaders over the last two days in a bid to find a majority for a new alliance.

Looking back over this, the country was plunged into a fresh political crisis on Tuesday after Prime Minister Giuseppe Conte quit as head of the ruling coalition which has left the fractious coalition between Matteo Salvini's far-right League party and the left-leaning populists, Five Star Movement to it. We were expecting announcements about a new government today, but now we have to wait until next Tuesday, which will coincide with various headlines streaming through from the weekend's Jackson Hole and G7. We will soon find out, whether Salvini will indeed form a new alliance with the Five Star Movement  - but tensions between the two have proved too much and the conditions will be over the budget - If a new government, which would be Italy's 67th since World War II,  cannot be found, new rounds of elections will be called.

FX implications

If a new government cannot be found and fresh elections do take place, the euro will be under pressure again at a time where geopolitics is already at critical mass along with breaking point recessionary type of data in the eurozone ahead of next month's ECB.