If you’d like to know should I buy Euros now or wait, it may help you to know that, whilst everyone has been fixated on Brexit and the possibility of No-deal, Italy’s economic woes have quietly festered in the background.
It was less than a year ago that the Italians finally agreed a budget deficit of 2.0% with the European Commission, after backing down from the initial 2.4%.
However, with the economy now in recession, the Italian government has quickly restored the original proposed budget deficit of 2.4%. This throws out the agreement reached with the European Commission less than 12 months ago. Clearly, this has not gone down well with the EU or other Eurozone nations.
The International Monetary Fund is already forecasting that the Italian fiscal deficit will reach and exceed 3%, a violation of EU rules. The EU project cannot afford for Italy to default on its debt.
With France’s President Emmanuel Macron taking a tough approach in Brexit negotiations, there is a real chance that an Italian default could be the next big shock to the Eurozone, not Brexit.
With limited scope for monetary stimulus, could an Italian debt default be fatal? The Italian economy is the third largest in the Eurozone and problems here could pose an existential crisis.
Pound to Euro prediction this week
GBP/EUR has remained range-bound without reason to break away, and with MPs now enjoying their holidays, there seems little chance of a Brexit deal being reached in the near term.
Sterling is holding firm as few now feel that the UK will leave the European Union without a deal. Both the EU and UK Parliament are keen to avoid disruption to their economies, so markets expect a deal to be done at some point, assuming we leave the EU that is!
For more information or to discuss how current events may affect your Euro transfer, please do not hesitate to contact me.