Despite all of the Brexit volatility that had sunk GBPEUR throughout last week, there is no doubt the markets will have been taking note of the recent conflict from Italy, which has the potential to damage the euro’s value long term.

Currency Pair% Change in 30 daysDifference on £200,000
Mario Draghi to speak this afternoon

The Italian Government appear to be showing no signs of conceding ground over their spending plans, in a brawl with Brussels that has been escalating since the start of the month. The question in particular for euro exchange rates might not be who will concede ground first, but perhaps more importantly how the European block will be viewed in the eyes of the markets once a decision has been made? If the EU is unable to hold Italy to its initial commitments, will other members take this as an opportunity to push for more flexibility in regards to their own fiscal targets?

The manner in which the EU and the International Monetary Fund meet an agreement with the Italian Government will likely have a profound impact on the value of the euro moving forward. The European Commission is scheduled to publish a summary of their talks with Italy tomorrow morning so volatility is to be expected as the markets begin to assess its exposure.

With the EU financial stability review due out early this morning, any further proof of the risks attached to Italy’s banking crisis will add more weight onto the EU’s decision on Italy’s spending budget.

When to buy Euros?

Personally, I feel it is completely conceivable that GBPEUR would be trading in the low 1.10s, had the Italian conflict not been added to the mix. Should the EU Commission manage to stay strong and force the Italian Government’s hand, the markets might react in kind and the euro’s impressive rise from last week could continue on the same course.

If you are looking to purchase euros in the short term, it may pay to consider your options whilst the uncertainty is holding the momentum away from the single currency. We could be looking at a significantly stronger euro towards the end of the week.

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