News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Euro May Fall Further as Italy Clashes With EU on Budget

Euro May Fall Further as Italy Clashes With EU on Budget

Dimitri Zabelin, Analyst

TALKING POINTS - EURO, SWISS FRANC, EUROPEAN UNION, ITALY, BUDGET

  • Euro declining as budget talks between Italy and EU Commission approach
  • Spread between German and Italian 2-year bond yields notably increasing
  • Friction between Italy and EU laws likely to increase political risk in region

Italy’s economic nationalism has caused significant volatility in the Euro and regional bond markets. Italy’s recently released 2019 budget deficit target of 2.4% sent the single currency down, while the spread between German and Italian bond yields widened.

Euro May Fall Further as Italy Clashes With EU on Budget

Italy is set to present its proposal to the EU Commission on October 15th. The regional bloc’s executive, is likely to reject their proposal however due to the regulations surrounding member states’ debt-to-GDP ratios and deficit limitations, all of which Italy is currently violating.

Because of Italy’s massive debt, they are required to follow a specific set of regulations known as the Excessive Deficit Procedure (EDP). This requires that they commit to a target that will bring deficits and debts back to statutory levels. If they cannot propose a fiscal plan within regulatory parameters, they face the possibility of economic sanctions.

Friction between Italy’s anti-establishment government and EU technocrats is likely to continue weighing down on the Euro. The increased political risk may cause a rise in demand for regional alternatives such as the Swiss Franc and British Pound. If broader risk aversion follows, the Yen may also rise.

EURO TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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

DISCLOSURES