The euro currency was rattled last week as news broke of the ongoing tussle to form a government in Italy.

After Italy’s President vetoed the anti-establishment party’s choice of Prime Minister, the prospects of fresh elections lingers.

At the same time, this has put most officials on the back foot with the prospects of a stronger vote share for the 5-Star Party and the League likely to put both these parties as a major contender.

Investors responded with Italian bond yields rising including the spread between the Germany and Italian 10-year yields rising to the highest level in five years.

U.S. unemployment rate falls to 3.8%

The U.S. economy was seen posting strong job gains in the month of May on all fronts with economists calling “the economy is firing on all cylinders.” Data from the U.S. Labor Department release on Friday showed that the U.S. economy added a solid 223,000 jobs during the month of May.

This was a strong increase from April’s downward revised print of 159,000 and higher than expectations of 188k.

The stronger than expected job growth reflected the continued uptrend in the employment across different sectors covering manufacturing, services and construction. The U.S. unemployment rate was seen falling to 3.8% marking a new low.

This came as a surprise as economists expected to see the unemployment rate staying unchanged during the month of May at 3.9%.

The drop in the employment came with a spike in employment which increased 293,000.

The average hourly earnings data showed that average earnings increased 2.7% on an annulized basis until May 2017.

This was a slight increase from 2.6% annual pace of wage growth in April. Besides the jobs data, the ISM released its monthly manufacturing PMI report.

According to the official data, the manufacturing activity in the U.S. increased to 58.7 in May, beating estimates of 58.1. In April, manufacturing activity was measured at 57.3.

The new orders index rose to 63.7 while the employment index was seen rising to 56.3 in May, up from 54.2 in April.

Bank of Canada holds interest rates steady

The Bank of Canada held interest rates unchanged last week during its monetary policy meeting held on Wednesday. The BoC left the interest rates steady at 1.25% as widely expected.

However, the central bank sprung a surprise by removing dovish language from its forward guidance, suggesting that future interest rates will most likely rise.

The central bank however noted that global uncertainty surrounding trade and stress in emerging markets due to higher borrowing costs from the U.S. remain key factors for the central bank.

The BoC however removed its familiar dovish language from the statement which until now pledged a cautious approach to setting its monetary policy.

“Overall, developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target. Governing Council will take a gradual approach to policy adjustments, guided by incoming data,”

the bank said in a statement.

The removal of the dovish language from the BoC’s statement sent the Canadian dollar surging higher on the day amid renewed speculation that the Bank of Canada could resume its interest rate hikes over the next coming months.

Investors were on the backfoot following weak labor market data. The markets currently expect to see at least two more rate hikes from the BoC this year.

Eurozone flash PMI’s rises at the slowest pace in 18 months

Flash PMI’s released by IHS Markit for the Eurozone for the month of May showed that the Eurozone’s economic growth was further slowing.

This comes amid the first quarter GDP data which showed that the Eurozone economy increased at a pace of 0.4% on a quarterly basis.

The data from showed that the Eurozone composite output index fell to an 18-month low to 54.1 in the month of May.

This was a weak reading as the composite index was registered at 55.1 in April. Economists forecast that the composite output index would remain unchanged at 55.1.

The manufacturing PMI fell to an 18-month low at 55.5 in May compared to 56.2 in April. Services PMI for the Eurozone fell to a 16-month low at 53.9.

Despite the weak patch of data, economists maintain that the numbers were consistent with the 0.4% quarterly pace of growth.

Chris Williamson, the chief economist for IHS Markit said that

“In the previous months, various factors such as extreme weather, strikes, illness and the timing of Easter dampened growth.”