With political and economic concerns piling up, the Euro is certainly feeling the pressure today. After beginning the European session locked in a bearish relationship with the Pound, the common currency posted additional declines as Italy’s potential political collapse and disappointing domestic data took a toll.
The Euro to Pound Sterling Exchange Rate is currently trading in the region of 0.8360 as of 11:30 GMT
After Silvio Berlusconi, one of the most controversial figures in the political world, attempted to force snap elections by engineering the resignation of five ministers, fears that Italy’s already fragile government would peel apart climbed.
However, Italian Prime Minister Enrico Letta is determined to hold his nation together, and intends to build a new parliamentary majority with a confidence vote on October 2nd.
As the Eurozone’s third largest economy is already struggling economically, this kind of issue cranks up the weighty pressure Italy has spent years trying to dislodge.
According to analyst Fabio Fois; ‘Protracted political impasse along with any delays in the formation of the grand coalition in Germany do not bode well for swift Eurozone policy decisions.’
Similarly, currency strategist Richard Franulovich observed; ‘Fresh elections thus may be inevitable, a potentially very toxic development for markets given the space it would create for anti-Euro, anti-austerity sentiment to rise yet further. Neither the Euro nor the US Dollar have much going for them this week’.
The looming deadline for the US budget negotiations also lessened the appeal of higher-risk assets overnight as the prospect of a federal shutdown spooked investors.
The EUR/GBP Exchange Rate hit a low of 0.8326
While Italian political developments are the main driver of Euro movement today, disappointing German retail sales figures also weighed on the common currency early into the European session.
Seasonally adjusted sales for the Eurozone’s largest economy advanced by 0.5 per cent in August, month-on-month. Although the result was a significant improvement on the previous month’s 0.2 per cent decline, it was well below economist estimates for a gain of 0.8 per cent.
And yet more pressure piled on the Euro as a report showed that inflation in the Eurozone fell even further below target, hitting a three and a half year low of 1.1 per cent in September.
Consumer prices were down from 1.3 per cent the previous month and below the 1.2 per cent level expected by economists.
Although the result is significantly below the European Central Bank’s close-to 2 per cent target, economist Christoph Weil stated; ‘We see no inflation risks. There is no reason for the European Central Bank to act on inflation. It can stay with its expansionary policy.’
The dip was largely caused by declining energy prices, although the climb in food costs also slowed markedly.
Other Eurozone data to look out for this week includes German and Eurozone employment figures, Eurozone manufacturing/construction and services PMI, the Eurozone’s retail sales report and German producer prices.
The ECB rate decision, taking place on Thursday, will also be of particular interest.
Current Euro (EUR) Exchange Rates
< Lower > Higher
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3496 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8360 <
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.4462 <
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6340 >
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7405 <
The Pound Sterling /Euro Exchange Rate is currently in the region of: 1.1964 >
The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.6909 >
The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6126 <
(Correct as of 11:30 GMT)