The Pound made gains against the Euro on Friday with GBP/EUR moving above 1.1250. Be wary of thinking this is due to positive news on Brexit or impressive UK data, it can be largely attributed to concerns over the Italian economy. The Euro report below discusses the issues surrounding Italy's current deficit and the knock on effect this is likely to have on the single currency.

Currency Pair% Change in 1 monthDifference on £200,000

Late last week it emerged that Italy would run it’s budget with a deficit of 2.4% of GDP. Analysts have predicted that this could result in a €20bn increase in public spending. This also alarmed investors and saw the Euro drop in value against the majority of major currencies. The higher than expected budget will not sit well with Brussels as the Italian economy continues to be a thorn in the side of the bloc. Italy’s debt is currently the second highest in the Eurozone, just behind Greece at around 131% of GDP.

Despite the Italian situation the Pound is still extremely vulnerable due to the lack of clarity surrounding Brexit. In order to see a significant rally for sterling I feel we will need firm news on customs union access or firm news on the Irish border. The peak of the market in the last six weeks has been 1.1301 which proved to be a resistance point. If you have to move short term I would be careful of having unrealistic estimations as a target rate of exchange.

Unemployment & Manufacturing PMI - Today

Unemployment data is a key measure as to the health of an economy and can influence the market. There is predicted to be no change from the previous figure, but if the data released proves this wrong, expect volatility. Manufacturing Purchase Manager Index (PMI) measures activity within manufacturing data, and although not as influential as services data it can still cause volatility. The prediction is there will be no change, but as with unemployment data if the figures arrive away from expectations expect market movement.

Unemployment & Manufacturing PMI - Today

Services PMI & Retail Sales – Wednesday 3rd October

Retail sales data can give clues as to the stability of an area. Consumer spending is vital to a healthy economy; there is predicted to be an increase from -0.2% to 0.2% which could cause Euro strength.

Services PMI is also released and makes up a substantial proportion of GDP. It can influence Euro value, so is definitely worth monitoring.

There is expected to be little change, but things do not always go to plan and small changes on the currency market can make big changes on your return.

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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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.