The Euro has come under increased pressure against the Pound over recent days as the UK appears to be getting closer to agreeing on a Brexit deal. EU Brexit Negotiator Michel Barnier has suggested yesterday that an agreement could happen as early as next week, which has caused the Euro to weaken against Sterling by 1.65% since this time last week. To put this into monetary terms, a £200,000 transfer has become €3,700 more expensive if timed at the lowest point compared to the highest point of the last week.  

Currency Pair% Change in 1 monthDifference on £200,000
GBPEUR3.2%€7,085

Another factor weighing down the value of the Euro is that of the Italian Budget concerns. An independent watchdog, the European Fiscal Board, has criticised the European Commission of being too generous with the Italian Government, making exceptions to EU budget rules last year during budget negotiations and allowing them to miss targets in order to reduce the deficit.

Italy’s credit rating could be downgraded this month

Italy’s credit rating could be downgraded this month

To add to this, Italy is facing a potential downgrade to its credit rating by ratings agency Moody’s, which could have drastic implications on the value of the Euro.

Moody’s have suggested that it is waiting to see which path the Italian Government will take on topics such as public spending, its pension system and plans to stop a sales tax increase, before making a decision on whether or not to downgrade Italy’s rating from Baa2. This has already been extended once in order for Moody’s to have full sight of conditions before making a decision.

Credit ratings agencies help investors to decide how much risk is involved in buying Government debt, and as investors have already been nervous regarding Italy’s new Government and its policies, this is certainly something to keep a close eye on if you have a transfer to make involving the Euro. The Italian Government is expected to submit its 2019 budget to the European Commission by next Monday, and it is expected that both Moody’s and S&P Global (another credit ratings agency) could submit their decisions before the close of the month.

This afternoon at 12.30pm the European Central Bank will release their Monetary Policy meeting accounts, and any further references or information regarding the ending of its Quantitative Easing programme could provide fluctuations on Euro exchange rates.

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