The main headline over the weekend were the violent protests in France, followed by French President Emmanuel Macron’s speech on Monday – which caused widespread reaction over their own budget. President Macron vowed to increase the minimum wage by 7% in 2019, which would be subsidized by the French Government. This alongside a recent U-turn in fuel taxes after the violent protests by the ‘gilets jaune’ mean that France could well be in the eye of the European Commission over their own budget deficit before long.
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The spotlight is now on Italy again as Prime Minister Giuseppe Conte meets European Commissioner Jean Claude Juncker later today as they try to negotiate a compromise on the proposed budget – reports so far have alluded to the EU offering Italy an additional 6 months to revise its proposal.
If this does occur, it is likely that the euro will become less risk based and could start to regain some strength in the short term however the long term problem remains and could be a thorn in the side of the euro in the months to come as divisions between Conte, Tria, Salvini and Di Maio start to emerge, with local newspapers also divided. Some are saying a deal has nearly been reached whilst others saying the budget stance have hardened.
Tomorrow will welcome a host of important economic data, followed by the important monetary policy meeting where the ECB will discuss the economic situation within the Eurozone. Whilst they are expected to bring an end to the Asset Purchasing Programme, analysts are expecting a cautious tone surrounding future monetary policy and cite Brexit, Italy, France and Germany as to why they remain cautious.
With this in mind, I think that we will see the euro remain under pressure as we end the week with so many different events across the Eurozone at the minute I am finding it difficult to see where euro strength will emerge from in the coming weeks.
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