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Euro Suffers in Face of Ongoing Italian Problems

The euro was the major casualty of foreign exchange trading on Thursday and into Friday after new concerns were raised over the economic performance of one of the eurozone’s major economies.

Italy, which has significant public sector debt, decided on Thursday that it would stick to a budget deficit target of 2.4% of its GDP.

This is more than the European Union’s preferred level, which led to tensions between Italy and the wider bloc.

The euro went down by more than 0.9% over the course of the week, and so far today, the EUR/USD pair has gone down by 0.2% to the $1.1615 mark.

The euro’s fall was in part for economic reasons, but also due to the strong political dimension to the problem – a variety of instability which frequently causes currency fluctuations.

Some members of the Italian government, including the economy minister Giovanni Tria, were believed to have preferred a target of under 2%. However, with the pro-2.4% ministers winning the day, disagreements were inevitable.

Elsewhere on the forex markets, the US dollar managed to reach its highest point in nine months in the USD/JPY pair.

This was partly due to a positive data release. US GDP went up by a 4.2% clip in the year’s second three-month period, it was announced yesterday.

The coming week looks like a busy one for the foreign exchange markets, and traders will have a lot to look out for.

Other than a couple of public holidays for Labour Day and the Queen’s Birthday in Australia and the National Day holiday in China, Monday will be active across the board. German import price index data for August will be out at 6am GMT, as will retail sales information for the same month.

Markit Economic’ Manufacturing Purchasing Managers Index (PMI) will come out for Europe at 8am GMT, and it is expected to hold firm at 53.3.

A speech from Eric Rosengren, the President of the Federal Reserve Bank of Boston in the US, will come at 4.15pm GMT – and is likely to monitored closely by traders following last week’s announcement of an interest rate rise by the overarching central bank.

Looking ahead to Tuesday, the Reserve Bank of Australia will announce its interest rate decision at 4.30am GMT. It is believed that the Bank will hold rates steady at 1.5%.

European producer price index data for August will come at 9am GMT, while the US’ Redbook index, which monitors store sales growth, will come out at 12.55pm GMT.

The euro was the major casualty of foreign exchange trading on Thursday and into Friday after new concerns were raised over the economic performance of one of the eurozone’s major economies.

Rounding off the day will be a speech from Jerome Powell, President of the national US Federal Reserve. Powell may use this opportunity to speak about the Fed’s potential plans for another interest rate rise in December.

Looking to Wednesday, a series of other major American data releases are expected. MBA mortgage applications information will come at 11am GMT, while crude oil stock changes will be released at 2.30pm GMT.

Japanese data on foreign bond investment and foreign investment in national stocks, meanwhile, will be out at 11.50pm GMT.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.


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