There is now a timeline on the Italian budgetary constraints which could easily trigger some global uncertainties. In trying to determine where the next major event to trigger a crisis would come from, Italian debt problems score very highly.
Today, Eurozone finance ministers will meet to discuss the budget impasse with Italy. The deadline is November 13th when Italy is expected to submit a revised budget, Italian Prime Minister Giuseppe Conte has said this already rejected plan is their final proposal.
When it comes to the euro the fears over the debt crisis of 2010-2014 which saw euro rates at nearly decade lows are still fresh in many investors’ minds. It is well understood that the Eurozone debt problems of that period have not disappeared, merely been swept under the rug.
The euro has been weaker in recent weeks owing to these concerns. Recent news that the Italian economy has stalled with 0% growth in Q3 will do little to calm fears and could be a major issue in the weeks ahead.
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Tomorrow is Services data for the Eurozone and Wednesday 7th is Retail Sales so not the busiest week of actual economic data. Euro rates might take their cues from movement on their respective currency pairs with some key information from both the UK and the United States.
EUR/USD is the most heavily traded currency pair and swings on EUR/USD can influence the Euro against other currencies. The US interest rate decision on Thursday could see some big swings on the US dollar which might influence shorter term movements on the euro. The same can be said of the US Mid-Term elections tomorrow, with results due Wednesday.
The pound to euro rate has risen as investors feel a potential Brexit deal is being discussed. This week is reported to hold some key developments which would give some credibility to the recent movements which have seen the pound rising.
Clients selling euros for pounds might find themselves on the wrong side of movements as Brexit is the main factor keeping sterling rates weaker.
GBP/EUR rates could well see a retest of the April and October highs, depending on how well this week goes. Sterling should rise on good news but there are still plenty of hurdles ahead, including the EU agreeing to the terms and also the UK Parliament voting on a deal.
Therefore, Brexit progress carries the familiar ‘handle with care’ word of warning. Sterling to euro rates could easily find themselves knocked back down following any comments from the EU or indeed within the UK, which threaten the more positive sentiments and reports.
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