FOREX-Italian concerns weigh down euro, dollar buoyed by trade hopes

* Italy may break EU budget rules, deputy prime minister
says
* Trump says trade deal with China still likely
* Sterling slips on weak wage growth

(Adds Di Maio comments, updates prices)
By Karen Brettell
NEW YORK, May 14 (Reuters) - The euro slid against the
dollar on Tuesday after Italy's deputy prime minister said the
country is ready to break European Union budget rules on debt
levels if necessary to spur employment.
"If we need to break some limits, like the 3%
(deficit-to-GDP ratio) or 130-140% (debt-to-GDP ratio), we're
ready to go ahead," Matteo Salvini, Italy's deputy prime
minister, said. "Until we arrive at 5% unemployment, we will
spend everything that we should and if someone in Brussels
complains, that won't be our concern." Win Thin, global head of currency strategy at Brown Brothers
Harriman in New York, said "renewed Italian concerns" were
affecting the market.
Salvini's coalition partner, Luigi Di Maio, later told
reporters that it was "pretty irresponsible" to create market
tensions by speaking about increasing Italy's high debt level.
The dollar was also buoyed as U.S. and Chinese officials
said the two countries would continue to negotiate on trade.
U.S. President Donald Trump insisted on Tuesday that trade
talks with China had not collapsed and called the widening
U.S.-China tariff war "a little squabble," even as his
administration readies 25% duties on all remaining Chinese
imports. Continuing uncertainty over whether an agreement is likely
should support safe-haven currencies, including the dollar and
the Japanese yen, Thin said.
“There is too much uncertainty," Thin said. "I think things
will get worse before they get better.”
Investors are also focused on whether Trump will impose
tariffs on imported cars and auto parts as talks continue with
the European Union and Japan.
Trump received a "Section 232" investigation report in
February, widely believed to have concluded that car and auto
part imports pose a risk to national security. The president's
90-day deliberation period is due to end on
Saturday. Sterling dipped to two-week lows as British employment data
showed wage growth in the quarter ending March was lower than
expected, signaling the possible start of a turbulent period for
the broader economy. Concerns about Britain's exit
from the European Union are also weighing on the British
currency.
Britain's opposition Labour Party said on Tuesday that Prime
Minister Theresa May had not yet made a shift in Brexit talks
and that the party was concerned a future Conservative leader
could renege on any promises made by the current government.
Currency bid prices at 8:20AM (1220 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1212 $1.1223 -0.10% -2.24% +1.1246 +1.1209
Dollar/Yen JPY= 109.5500 109.3000 +0.23% -0.64% +109.7700 +109.1500
Euro/Yen EURJPY= 122.82 122.64 +0.15% -2.69% +123.3900 +122.5900
Dollar/Swiss CHF= 1.0075 1.0063 +0.12% +2.66% +1.0085 +1.0052
Sterling/Dollar GBP= 1.2933 1.2955 -0.17% +1.38% +1.2970 +1.2924
Dollar/Canadian CAD= 1.3473 1.3475 -0.01% -1.20% +1.3487 +1.3455
Australian/Doll AUD= 0.6941 0.6943 -0.03% -1.52% +0.6959 +0.6940
ar
Euro/Swiss EURCHF= 1.1298 1.1294 +0.04% +0.39% +1.1329 +1.1289
Euro/Sterling EURGBP= 0.8668 0.8659 +0.10% -3.53% +0.8691 +0.8655
NZ NZD= 0.6577 0.6566 +0.17% -2.08% +0.6590 +0.6565
Dollar/Dollar
Dollar/Norway NOK= 8.7379 8.7678 -0.34% +1.15% +8.7707 +8.7195
Euro/Norway EURNOK= 9.8006 9.8375 -0.38% -1.06% +9.8496 +9.7956
Dollar/Sweden SEK= 9.6139 9.6354 -0.33% +7.25% +9.6448 +9.5857
Euro/Sweden EURSEK= 10.7803 10.8160 -0.33% +5.03% +10.8260 +10.7710