Euro forecast set to weaken, on Italian debt crisis

Italian debt lowers Euro Pound forecast

In this Euro forecast, we’ll look at how financial firm TS Lombard believe that it will be a matter of “when” rather than “if” another full-blown sovereign debt panic will occur.

It could be that the Italian government is positioning itself to demonstrate to its voters that it has not sought to leave the EU, but rather the EU is leaving Italy. Italy could be getting ready to inform the EU that it has had enough. Then the Italian government could inform the public that the EU is to blame for Italy’s economic woes.

This has the potential to hit both the stock market and the currency market in a serious fashion. There could be a far bigger market reaction than when the Greek crisis hit the markets a decade ago. Italy’s economy is ten times the size of that of Greece and is the eighth largest economy in the world.

Although this is a serious concern for those holding Euros, I am not of the opinion that the debt issue will addressed in the short term. Brussels and Italy will discuss potential debt solutions before an agreement is reached, or indeed Italy may remain stubborn and the problem hits the Euro.

Is the Euro going to go up? Effect of Brexit

Brexit continues to weigh down Sterling. With no Prime Minister (PM) and Brexit in limbo, there seems little hope for the Pound short-term.

Boris Johnson is clear favourite to become PM, and he has stated that he will bring a ‘no deal’ scenario back to the table, to negotiate a better deal with Brussels. This does not bode well for Sterling, because the higher the probability of a ‘no deal’, the weaker you would expect Sterling to become.

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