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There was a short term drop in the value of the euro earlier this week on Tuesday, as news broke that Italian Prime Minister Giuseppe Conte has resigned. The euro dropped against the pound and this pushed the GBP/EUR interbank rate to its highest level of the week which was around the 1.0980 level.

The loss for the euro was quickly reversed, but the initial reaction may have demonstrated the markets concerns surrounding the Italian political establishment.

This isn’t the first time this year Italian politics has hit the headlines. Earlier this year the Italian coalition government between League and 5-Star Movement, which is now in the process of breaking up, which has been mostly instigated by League leader Salvini, has been at loggerheads with the EU regarding its Budget. Italy is the 3rd largest Eurozone economy and the anti-EU rhetoric along with the regions 2nd largest Debt to GDP ratio (after Greece) could cause further issues for euro exchange rates. It may be worth following Italian politics if you’re interested in the euros value.

Will the European Central Bank follow expectation?

Could a German stimulus package underpin the Euros value?

Manuel Oliveri, a strategist at Credit Agricole has this week suggested that the talk in Germany of introducing a stimulus package to aid the slowing economy could be good for the euro. Market attention may be shifting to the US Federal Reserve as US President Trump continues to put pressure on the Fed regarding interest rate cuts, and this coupled with supporting stimulus packages in Germany could help EUR/USD interbank rate move up to 1.12 by September according to Oliveri. The interbank rate currently sits just below 1.11.

Key data set for release this week

The key economic releases this week are today’s German Services and Manufacturing PMI figures along with the figures for the Eurozone figures for the same sectors. You may wish to register your interest with if you would like to be kept updated with any shifts in EUR exchange rates.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.