Italy’s Parliament approved a revised budget for 2019, despite claims that the EU dictated the budget.

Currency Pair% Change in 1 monthDifference on £200,000
GBPEUR1.83%€4040 EUR
ECB interest rate decision due on Thursday

The populist Government vowed to push through costly reforms including a universal basic income, however this was quickly raised as a concern by the EU as to how the Government’s spending would impact Italian debt levels. It was told to revise its budget, or face fines and disciplinary action.

The deal was reached last week with the European Commission. Italy agreed to lower its planned budget deficit from 2.4% of GDP to 2.04%. Opposition lawmakers have criticised the Government as the last minute deal left Parliament unable to debate the altered proposals. There have already been protests outside of Parliament.

The Italian Budget and fallout with the EU was one of the main reasons behind the Euro’s demise in the later part of 2018. With the EU sorting things out with Italy, will we see the Euro start off 2019 on the right foot?

What else could affect the Euro long term?

Inflation within the Eurozone will likely be on the lips of most investors this year. At the last ECB monetary policy meeting in December 2018, Mario Draghi hinted that they were monitoring inflation levels ‘closely’. The ECB are expected to completely wind down its Asset Purchasing Plan (APP) and look at raising interest rates by September. The ECB have cited the current trade war between the US and Brexit as reasons as to why economic growth and inflation have stalled in the later part of 2018, it will be interesting to see if this trend continues.

Politically, the European elections will be another main event for the Euro in 2019, with any rumours and movement driving the Euro’s value until May in my opinion. With the far right figureheads finding their voices within the Eurozone through 2018, it will be interesting to see if this trend continues, especially with the latest bought of protests and violence in France and Spain.

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