The Euro slipped against the US Dollar, falling close to a two-month trough ahead of a European Commission meeting which will discuss the Italian budget problem. Analysts say that though it would be an unprecedented move, it is possible that the EU could decide to reject Italy’s budget and demand that it be changed to coincide with EU regulations. Investors appear to now have another issue besides the Brexit to be conflicted over and that is the political turmoil in Italy.
As reported at 11:31 am (BST) in London, the EUR/USD was trading at $1.1476, up 0.10% and off the session trough of $1.14395; the high was recorded at $1.149. The EUR/GBP was trading at 0.88379 Pence, down 0.02%; the pair has ranged from a low of 0.88195 Pence to a peak of 0.88448 Pence in this trading session.
EU Decision on Italy Crucial
Concerns over Italian debt and government spending has had many FX traders questioning the European Central Bank’s decision to move forward with a tightening policy next summer. One currency strategist is afraid that support for a stronger Euro, given the ECB’s normalization outlook, could crumble with worries over Italy’s budget; Italy is the Eurozone’s third largest economy. If Brussels decides to implement the Mastricht rule, which requires public debt to be at 60% of GDP, analysts say that Italy will likely struggle to achieve it, given their current debt-to-GDP ratio of 130%.
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