GBP/EUR Stable as Investors Nervous about Italian Budget Situation
The GBP/EUR exchange rate has shown a small rise of 0.1% today, and is managing to continue to hold onto its two-week high following yesterday’s Pound rally.
Sentiment towards the Euro still remains affected by the controversy sparked by Italy when it approved an austerity-busting budget that broke the EU’s rule on a 2% of GDP limit for deficits, with fears that this ‘fiscally irresponsible’ move could lead to a crisis in Italy’s banking sector.
These fears first surfaced last week when the new Italian coalition government in Rome announced that its budget for the next three years would see it pencilling in a deficit of 2.4% of GDP – leading to an immediate reaction from the EU.
EC President Jean-Claude Juncker said at the time that Italy could turn into ‘the next Greece’ – a remark that rattled EUR investors and angered the Italian government.
Yesterday, however, saw Italy’s government back down somewhat, promising to lower the budget deficit targets to 2.2% in 2020 and 2% in 2021.
The move pleased the markets, with Italian bond yields soaring in response, although the tensions between Rome and Brussels remain.
UK Car Sales Hit the Brakes in September as Figure Unexpectedly Plunges 87k
Sterling is struggling to rise this morning as the latest figures from the Society of Motor Manufacturers and Traders (SMMT) revealed that UK new car sales slumped by around 20 per cent in September.
Vehicle registrations fell by 87,000 to 338,834 in September, with the dramatic decline being attributed to a number of factors including the introduction of new EU emissions tests, new tax rules and bottlenecks in supply.
The SMMT explains: “September’s large decline follows an unusually high August and a turbulent first eight months of the year as the market responded to a raft of upheavals, from confusion over diesel policy to VED [Vehicle Excise Duty] changes and, latterly, transition to the new WLTP [Worldwide Harmonised Light-Duty Vehicles Test Procedure] emissions standards.”
GBP/EUR Exchange Rate Outlook: German Factory Data in the Spotlight
Looking ahead, the GBP/EUR exchange rate may find itself under some downside pressure tomorrow when Germany releases its latest factory order figures.
Current forecasts suggest the data will reveal an order growth rebound from -0.9% in July to 0.5% in August.
There will also be industrial production figures for Denmark, Spain and Sweden, with economist unable to agree on a consensus expectation of what these will reveal.
During the same session Sterling will be attempting to keep EUR at bay if tomorrow’s Halifax house price index for September has risen in line with expectations.
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