The resurgence of a populist government in Italy is unlikely to push the euro significantly higher amid concerns the country will be spending more than what its economy generates.

The euro has been on a sketchy patch since the start of the year — becoming stronger against the U.S. dollar, mainly in the first months of 2018, but seeing a reduction in strength against the greenback since late April.

Moves in the exchange rates are significant not only for currency traders, but also for equity and bond markets. This is because currency fluctuations affect the level of imports and exports — which ultimately impacts companies’ performances — and also the level of monetary intervention from central banks.

Analysts have raised concerns that the government accord between the Five Star Movement (5SM) and Lega will cause a fiscal slippage — in a country that has the second highest debt pile across the euro area, at about 130 percent of debt-to-gross domestic product (GDP). As a result, according to some currency experts, such worries are unlikely to send the euro higher.

“The Italian headache is going to be with us for a while, and we won’t see the euro bounce meaningfully until Italian credit stabilizes,” Stephen Gallo, European head of foreign exchange strategy at Bank of Montreal, told CNBC via email. He expected the euro to rise slightly in the coming months to $1.21 on the back of a lower dollar.

The euro was trading Monday morning at about $1.1740. In February, the exchange rate hit a peak of $1.2508.

However, other currency analysts believe the euro could move higher in the coming weeks, supported by positive data releases. Viraj Patel, foreign exchange and macro strategist at ING, said in a note Monday morning that if Italian President Sergio Mattarella postpones some of the planned spending measures, there could be a relief rally in the euro.

“We would expect a relief rally in the euro if President Mattarella pushes back on the debt-financed spending policy agenda and we get some solid euro zone data this week,” he told CNBC via email.

Patel is still looking for EUR/USD at 1.30 by year-end – but he recognized that “there is a perfect storm right now keeping the single currency depressed.”

The issue for markets is not just the government’s fiscal agenda, but also its potential plans to exit the euro zone. Although this idea is not written down on the government agreement, in the run-up to the March election both parties mentioned a referendum to leave the common currency. The right-wing Lega is still of the opinion that such a referendum should take place when politically feasible.

A break-up from the euro could depreciate that currency if markets started doubting the sustainability of the European project. Speaking to CNBC’s “Squawk Box Europe” on Monday, Federico Santi, Europe analyst at Eurasia Group, said he would not rule out the possibility of a euro referendum, but at the moment, this is not on the agenda.

Even if it was, Maartje Wijffelaars, senior economist at Rabobank, said that this would be a very lengthy process and thus mean that the government would not have time to go ahead with its other policy aims. “I don’t think the euro is at risk,” she said via email.

She added that the two populist parties will challenge the European budget rules, but threats to leave the euro area are “empty.”

“Plus, if they indeed would want to trigger a process to get Italy out of the euro, they would need to change Italy’s constitution, which is a lengthy, very lengthy process — we’re talking about years with almost certainly a referendum at the end of the process.”