Italian Spendthrift Government does not bode well for the Euro
The markets are clearly concerned about the Italian collation of League and the 5 star movement . The Italian stock market and the Euro has suffered. The next Italian Prime Minister is expected to be announced as Giuseppe Conte, he is predicted to make significant cuts in taxes, provide additional welfare and also wishes to roll back pension reforms.
A new government that has the intention to spend large sums of money does not bode well for the Eurozone. Italy is the bloc’s third largest economy, but is also the most indebted next to Greece.
Germany are currently trying to rid themselves of all public debt in an attempt to avoid joining a debt consolidation pool for the entire Eurozone. As Germany is the engine room of the EU they would be expected to contribute more to debt repayment , essentially paying off less affluent countries’ debt. The new coalition government in Italy would clearly make the debt pool far more substantial.
Euro sellers should consider moving at current levels considering the present outlook. If we look at Sterling against the majority of major currencies there has been substantial falls due to poor data and the poor interest rate forecast. GBP/AUD down by nearly 10 cents, GBP/USD also down by nearly 10 cents. Against the Euro however GBP/EUR moved into the 1.14s. Demonstrating the advance is clearly Euro weakness apposed to any positive data from the UK.
EUR Buyers – If you have to move short term move at 1.1430 +
EUR Sellers – Consider moving at current levels.
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