Theresa May's cabinet reshuffle, Angela Merkel's coalition problems, and Italy's elections will soon catch the market's attention
Yesterday, it was reported that UK PM May is going to reshuffle her cabinet ministers starting from today - in some ways it's a sign of real confidence there that she feels that her position is strong enough to go through with such an ordeal.
But it is said that she would also hire a "cabinet minister for a no deal" Brexit. The new minister will likely be based alongside David Davis - UK's Brexit secretary - to provide updates on preparations for leaving the EU without a trade deal in tact.
In some ways, preparing for the worst may not be such a bad thing - but the fact is, there is a prospect that an unwelcome outcome (no deal Brexit) is indeed a very real possibility and that may not bode well for market sentiment - and business/investor confidence - in general.
Meanwhile, within the EU, we see that there's still problems for Angela Merkel (this time from within her own party) in forming a coalition after several months of stalled talks. Merkel is hoping to start formal negotiations this week, but any negotiations/pacts must also accommodate the CSU party as well.
The base case is still for Merkel to come out with a favourable coalition which sees her working with Macron on EU reforms. But as with anything political, it is all very fickle and things can swing one way or another very quickly.
Lastly, in Italy we have elections coming on 4 March. Berlusconi may be banned from office, but reports are saying that he could yet play an influential role in the outcome. Uncertainty still looms large in Italy's elections - and there's still two months to go! Latest polls show that no coalition will be able to form a majority, so there's still a lot of under-the-table talks that we're yet to go through.
With both German and Italian political risks still at play, it could keep the euro pinned down for the first quarter of the year.
