Italy budget deadline looms
Italy is to give its response to the EU’s rejection of its budget proposals this week with a deadline set for Tuesday. Rome is being requested to revise its current plan to formulate a budget that is more in line with what the EU believe is within the guidelines. The Euro may well weaken further on this news as Rome are already indicating that the deadline will not be met and that they plan to stick firm to the proposals.
In the bond market there are being large reported increases in the amount of bets against Italian bonds, indicating there could further strain ahead for the Euro. A bond is a promise to pay back and the cost for the Italian government to borrow money to finance itself has been rising steadily. There is an expectation this will only continue further and tomorrow is a crucial time to see the extent to which this will occur.
The Euro could very easily lose significant value in the coming weeks as investors remain fearful over the possible loss of confidence in the region following investor concerns over Italy’s ability to repay its debts. Clients with a position buying or selling the Euro might wish to take stock of what could now be a very turbulent period ahead on the Euro.
Strong to weak
The Euro had remained strong in recent years as investors confidence over the possibility of a debt crisis began to fade, the stimulus program by the ECB, European Central Bank, had really helped to eradicate the stagnation in both growth and Unemployment that had plagued confidence in the region.
With political concerns rising with the departure of Angela Merkel, the ‘rock’ of European politics and stability in the Eurozone, could the Euro now be setting itself on a path to future weakness?
What is clear is that many of the problems and troubles previously alarming investors over debt levels and the ability of some countries to repay their debts, never went away. There is a concern that those problems are simply being shored up for another day.
If you have a position buying or selling the Euro, this could be a very important week ahead. If you wish to understand better what is likely to happen, or run through and discuss the all of the options available to maximise your exchange rate, then please do feel free to get in touch to discuss this further.
Thank you for reading and I look forward to hearing from you.