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EURUSD Rattled by Italian Budget Fears and Fin Min Resignation Worry

EURUSD Rattled by Italian Budget Fears and Fin Min Resignation Worry

2018-09-27 08:00:00
Nick Cawley, Strategist
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Euro and US dollar Talking Points:

  • EUR hit lower by Italian Budget delay fears.
  • US dollar picks up after non-descript FOMC meeting.

The DailyFX Q3 EURand USD Forecasts are available to download.

EURUSD Points Lower as Italian Budget Worries Surface

The Italian budget, due to be announced today, may well be delayed as both ruling parties push for a larger budget deficit, putting Italian Finance Minister Giovanni Tria in an uncomfortable situation. Tria has promised to keep spending under control, and within EU rules, while making money available to the ruling parties to keep their election promises. Both the Five Star and League parties are said to be pushing for a 2.4% budget deficit against Tria’s 2% limit, and talk is circulating that the Finance Minister may resign if his debt reduction plans are overuled.

Euro at Risk as Italy Prepares to Unveil Budget

Italian government bond yields traded higher Thursday with the 10-year nearing 3%. A breakdown in the Italian budget would put pressure on rating’s agencies to further cut their ratings, increasing borrowing the country’s borrowing costs.

Wednesday’s FOMC announcement and press conference passed without too much drama with the anticipated hike fully priced into the market. The Fed dot plot didn’t give any new clues going forward with one more interest hike expected in December this year, three more in 2019 and one in 2020. Fed chair Powell did remove ‘accommodative’ from his policy description, yet the overall take from the press conference was neither hawkish or dovish.

USD Undecided After Fed Hikes Rates

EURUSD Four Hour Price Chart (August 12 – September 27, 2018)

EURUSD Rattled by Italian Budget Fears and Fin Min Resignation Worry

IG Client Sentiment Datashow that retail investors are 41.4% net-long EURUSD – a bullish contrarian signal – but recent positional changes suggest that prices may soon trend lower.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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