The Australian dollar has bounced back in late trading today, recovering earlier losses on the back of the vote in Italy to change the constitution.
At 6.49pm (GMT) the dollar was trading at US74.85c after falling to as low as US74.11c directly after the announcement.
Italian Prime Minister Matteo Renzi’s called a referendum yesterday to change the constitution to remove some of the powers from Italy’s upper house in order to create more stability and make it easier to push through legislation.
The vote overwhelmingly failed with 60 percent voting no, forcing Mr. Renzi to immediately resign which caused a selloff in the Euro as well as risky currencies such as the Australian and Canadian dollars.
Investors now expect further turmoil in the Eurozone as Italy may have to call new elections which may bring to power the far right party who are lobbying for the country to exit the Euro and the overall European Union.
As well as the fallout from the Italian referendum, the Australian dollar will face another huge test this week with a raft of data due out locally and overseas starting with the RBA rate decision tomorrow followed by GDP numbers on Wednesday.
GDP from Australia have been on the slide over the last 6 months and with another disappointing number expected we may see the Aussie dollar come under pressure as the year finishes and talk of a rate cut may surface again.