The European Central Bank (ECB) meet today and will announce the latest interest rate decision at 12:45. ECB President Mario Draghi is expected to announce measures to protect the economy against any further economic slowdown which would suggest a gloomier outlook ahead for the EU. The EU still continues to battle with weak growth and low inflation, but it is the recent weaker inflation numbers which are likely to spur the central bank into action.
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The ECB is tipped to introduce a third round of technical stimulus measures to keep credit moving in the event of a sudden downturn. The euro is also coming under pressure as investors have pushed back expectations for the next interest rate increase. All of this bodes badly for euro exchange rates and the combination of a downturn as well as measures to support the economy could result in euro weakness going forward. The US China trade war is not helping the euro either and if a mini trade war breaks out between the US and EU over cars then this could be more trouble ahead for euro exchange rates.
The European Commission has escalated tensions with Italy by recommending disciplinary procedures are launched over its excessive budget deficit whilst stating it is not compliant with EU rules. The report released by the European Commission yesterday states that such action is warranted and that “Italy’s public debt remains a major source of vulnerability for the economy.” Italy’s debt has been referred by the EU as having a “snowball effect” as the deficit grows which is expected to rise to over 135% of Gross Domestic Product (GDP) by 2020.
The Italian debt crisis is still a major concern for the single currency as any financial crisis stemming from Italy could see contagion spread to other EU member states.
This morning sees the release of European Gross Domestic Product numbers where the numbers are expected to hold steady from the previous quarter at 0.4%. A strong number could help lift the euro although there is likely to be more interest in today’s press conference with Mario Draghi following the ECB meeting.
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