Euro halted the rally, the ECB and Italy on focus

On Tuesday, the euro stabilized, bounced off 20-month lows reached during the previous session after Italian voters rejected constitutional reforms proposed by the government, forcing the prime minister Renzi to resign.
The EUR/USD is now trading at 1.0718. On Monday, the single currency lost 1.86% against the dollar, after falling in early trading to 1.0507, the lowest level since March 2015.
Demand for the euro is supported now by signs that Italy will not hold early elections after the resignation of Renzi, and many analysts believe that before the elections in 2018 the interim government will be presented.
But the prospects for the single currency continues to remain vague on concerns about the financial condition of the unstable banking sector in Italy.
Italian banks are burdened with unpaid on time loans, and they may need a full-scale financial assistance from the European Central Bank.
Investors also remain cautious ahead of the ECB meeting on Thursday.
The European Central Bank is likely to announce the extension of its quantitative easing program, but any sign that they can begin to reduce the amount of asset purchases, may compensate the effect of the extension of the incentive program.