Currency traders largely disregarded the Italian general election on Monday morning as they waited for further clarity on the future government in the face of a likely hung parliament.
The euro was little changed Monday morning, trading at $1.2208 against the dollar at around 7 a.m. London time (2 a.m. ET). Despite strong support for far-right, anti-establishment and euroskeptic parties in Italy, the currency seemed immune to the political uncertainty in the third-largest euro economy.
"The reaction in FX (fixed income) markets to the eurosceptic shift in Italy so far has been muted, as investors await more clarity on the composition of the next government," Danske Bank said in a note on Monday morning.
The parliamentary elections in Italy arelikely to lead to a hung parliament, sparking weeks of negotiationsbetween the political parties. According to preliminary results, the Five Star Movement is set to be the largest political force, but a right-wing coalition led by Silvio Berlusconi's Forza Italia is set to win the most seats.
"We don't know what's going to happen with this government and we are really waiting to see who will try to form a coalition," David Zahn, head of European Fixed Income at Franklin Templeton Fixed Income Group, told CNBC on Monday.
According to Zahn, the worst outcome for markets would be a coalition between the populist Five Star Movement and the far-right Lega, formerly known as the Northern League.