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.

Free Trading Guides
Oil - US Crude
Wall Street
More View more
Real Time News
  • EU Commission to mobilise EUR 750bln for European recovery fund - EUR 500bln grants - EUR 250bln loans $EUR
  • BREAKING: Reports on the wires that the EU is considering an EUR750bn virus recovery plan. EU Commission to unveil details later today. #EUR #EuropeanUnion #COVID19
  • Join @PaulRobinsonFX 's #webinar at 5:30 AM ET/9:30 AM GMT to gain insight on indices and commodities for the active trader. Register here: https://t.co/gghsFsZYlx https://t.co/MpELL4brE5
  • The Canadian Dollar has proven stable in recent weeks following a dramatic turn lower in March, guided to the downside by energy markets. Get your $USDCAD market update from @CVecchioFX here: https://t.co/7tlrn74X3t https://t.co/dXPFiHz6EA
  • Idea de #trading del día: $GBPUSD e #IBEX35 https://t.co/keSNWeUnM5 https://t.co/Cxv4P4zZWc
  • Heads Up:💶 ECB Guindos Speech due at 08:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-05-27
  • ECB PRESIDENT LAGARDE: - No new Euro debt crisis after pandemic, what matters is how borrowed money is spent - Not overly concerned about high debt levels #EUR #ECB
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.62%, while traders in US 500 are at opposite extremes with 76.70%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/01rko7aQXN
  • Heads Up:🇿🇦 Inflation Rate YoY due at 08:00 GMT (15min) Previous: 4.1% https://www.dailyfx.com/economic-calendar#2020-05-27
  • BoJ states that Break-even level for its ETF holdings is estimated to be around 18,500 for Nikkei stock average $JPY
Euro at Risk as Italy Teeters on Weak Growth, Budget Clash with EU

Euro at Risk as Italy Teeters on Weak Growth, Budget Clash with EU

2018-11-06 02:30:00
Dimitri Zabelin, Analyst


  • The EU Commission rejected Italy’s budget proposal – resubmission due Nov 13
  • Weak Italian economic data concerns investors over Rome’s bold budget program
  • Euro likely to fall further, spread between German and Italian bond yields to rise

Check out our Q4 forecasts to learn what will drive key asset price movements through year-end!

Italy’s controversial budget proposal has significantly contributed to an already risk-averse environment and exerted further downward pressure on the Euro. It has also led to the progressively widening spread between Italian and German 10-year bond yields. This reflects the added return that investors are demanding for what they believe to be the increasing risk of lending to Rome versus Berlin.

Yield Spread Widens Amid Controversial Budget Talks

Euro at Risk as Italy Teeters on Weak Growth, Budget Clash with EU

After the EU Commission rejected the Italian government’s budget proposal, they were asked to resubmit another draft by November 13.

Prime Minister Guiseppe Conte has famously stated that there is “no plan B”, and the Italian government will not alter its fiscal stance. The tension between Rome and Brussels has been building for months and is not likely to fizzle out anytime soon as the Commission sharpens its teeth.

If the government fails to implement substantive changes to their budget proposal, the EU officials have considered the possibility of publishing a report on Italy’s compliance with the regional bloc’s fiscal rules on November 21st. This was originally planned for the spring, and is likely intended to exert pressure.

If the report finds Italy in violation of EU norms, it could trigger what is known as the “excessive deficit procedure” and may result in sanctions. That would entail a financial penalty of 0.2% of the Italy’s economic output. This may push the already battered economy closer to the precipice of default.

This comes on top of last week’s disappointing data from the Euro-Area and Italy. The region’s economy added 0.2% in the third quarter, falling short of the median estimate of 0.4%. Consumer confidence also took a hit, and a general pessimism around Europe’s future was further exacerbated when German Chancellor Angela Merkel announced she would not run for re-election in 2021.

Italian manufacturing substantially shrunk and economic growth stalled in the three months to September, undershooting estimates of 0.2% increase. The poor performance from these benchmark economic indicators is concerning investors who are skeptical of the government’s ability to push through a bold fiscal agenda. The Euro is likely to continue suffering from the growing uncertainty and tension between Brussels and Rome.

Euro Decline Amid Regional Uncertainty

Euro at Risk as Italy Teeters on Weak Growth, Budget Clash with EU


--- 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.


News & Analysis at your fingertips.