The focus of the market is Italian problems again. The fall of the euro could be much more serious than previously expected. Brussels took the first formal step, sent a letter with warnings to Rome. Further, there will probably be a rejection of the draft budget and a fine.

The loss of the euro from the opening of trading in Europe amounted to about 35 points. The euro / dollar pair is trading around 1.14.

European Commission officials have significantly changed the tone of communication with the Italian government. They noted that the draft budget is "especially a serious violation" of EU rules due to "unprecedented" deviations from targets. The members of the European Commission set the deadlines for Rome to respond, no later than October 22.

Meanwhile, Prime Minister Giuseppe Conte said that he was not at all worried about the contents of the letter, and assured that Italy would be able to dispel all doubts that arose in Brussels. The government, he said, slightly deviated from the goal. The Italian politician also expects that the European Commission will send similar warnings to Spain, France, and Portugal.

Note that some European leaders attacked the populist government in Rome. The head of the European Union warned that the budget will not be approved. Judging by what is happening, the most indebted region of the eurozone after Greece is waiting for shocks. The Five Stars-League coalitions prepared for a head-on collision with Brussels while discussing the cost plan. Such a prospect frightened the markets.

Friday's ten-year yield approached the highest in the last 4 years. This happened after Conte, a law professor who does not have previous political experience, could not convince his European colleagues that Rome should be allowed to flaunt the disregard of EU fiscal rules.

In addition to world politics, the monetary policy of the Fed and the ECB is pressing down on the euro. The governing council will get rid of negative deposit rates only at the beginning of 2020 and will bring them into positive territory by September of the same year, experts at Bloomberg predict. By that time, the federal funds rate will rise to 3.25%, their gap will widen from 2.25% to 3%. Note, this is a serious "bearish" factor for the euro / dollar pair.

The political crisis in Italy is now considered the biggest problem for the eurozone, while the risks of trade wars are assessed by experts as balanced. In addition, the events in Rome overshadowed information about the slowest economic growth in China in nearly 10 years.