The Euro is likely to see more volatility in these coming months as Italy comes back under the spotlight following discussions this week for the 2019 budget. More information in the market report below on how uncertainty in Italy is likely to impact the single currency, the table shows the range of GBPEUR exchange rates yesterday with the potential difference in Euro return when selling £200,000.00 during the high and low points.
|Currency Pair||% Change||Difference on £200,000|
The Coalition Government previously promised spending plans and tax cuts which are at odds with EU policy. With Italy’s public debt sitting at over 130% of Gross Domestic Product (GDP), which is the highest in the EU bar Greece, there are strong reservations about increasing that level of debt. Italy will need to present a draft budget to the EU for approval to make sure that it is within the EU’s regulations. It could prove to be a volatile period ahead as electoral promises were made which the Government seeks to deliver but will be tough to push through.
Italy will publish its deficit targets by September 27th before a draft is to be sent to Brussels by October 15th. The actual budget will then be published October 20th and the European Commission will have until the end of November to give an opinion before giving final approval before the end of the year.
There is chance that Italy will try and push through a fiscal expansion with a higher budget deficit regardless which could see the Euro weaken. The fear is that if there is a financial crisis in Italy and there is contagion this could be damaging for other EU economies and the Euro.
European construction output data is released this morning whilst ECB President Mario Draghi will be speaking this afternoon. The markets are waiting to see if he expands on his comments that he made last week about the negative impact of global trade wars which he says have become a key economic concern. He views uncertainties related to rising protectionism and a cycle of retaliation as the main threat to the global economy. Considering the latest developments after Trump imposed tariffs worth $200 billion on Chinese imports this week, his choice of words today are likely to be seized upon by the markets. The ECB is still phasing out its huge asset purchasing scheme which will stop in December with no rate hikes to come until end of 2019 at the earliest.
Any suggestion that the ECB may have to backtrack on signs of a slowdown could see additional volatility for the Euro. For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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