Italian debt problems are one of the major concerns on the currency markets for the euro, investors are anxious about how the new Italian Government will affect the country’s precarious financial position. Italian debt is 132% of GDP (Gross Domestic Product), in comparison to Greece at 180% and Germany at 68%. Italian debt problems have the potential to become a major issue to weaken the euro down the line.

Currency Pair% Change in 3 monthsDifference on £200,000
Euro to US Dollar Exchange Rate Hits 2-Year Highs

The problems centre on the new Italian Government’s budget proposals, which seek to test the limits of not only Eurozone borrowing rules but also investors patience over Italy’s ability to pay back its debts.

The Italian budget was agreed in Rome this week but Brussels needs to rubber stamp the plans. It will not be viewed well by other Eurozone Governments, who have had to scale back on spending and closely follow the rules, if Italy is allowed to engage in some major spending and borrowing.

There is little economic data left to drive the euro’s value for the rest of the week but clients with euros to buy or sell should be aware of this Italian debt issue as a potential market mover as news is released relating to developments.

GBPEUR focus, what can we expect next?

GBPEUR rates have been very interesting in recent weeks with key news on Brexit and Italian concerns the main driver on the pairing. It is quite conceivable we could see movement of up to 2 or even 3 cents in the coming weeks, as we get closer to some crunch times on Brexit. The market has to currently price in all the various outcomes of Brexit which is very difficult.

It is impossible for the market to completely price in the wide variety of outcomes, which include a no-deal, second referendum, general election or a deal being passed and agreed. Once a deal is reached the UK Parliament and also the EU need to approve that deal too. I feel clients with a GBPEUR position should not be taking chances and should ensure they remain in close contact with their account manager. You could make use of our full range of options, including the Limit order, Stop Loss and Forward Contract to protect or contain the exchange rate.

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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.