Euro Pound forecast: Italian PM resigns

Italian debt fears steepen

The Euro lost value during yesterday’s trading following the resignation of Italian Prime Minister (PM), Giuseppe Conte. He stated following his departure that he felt Matteo Salvini, his Deputy Prime Minister, was a political opportunist and had engineered this outcome.

It could be the case that Mr. Salvini is lining himself up to be the next PM. The next course of action however will be determined by Italian President, Sergio Mattarella. It could be the case that he asks Mr. Conte to form a new government or call for an election. General elections historically weaken the currency in question and this situation could hurt the Euro.

Should I wait to buy Euros?

The Euro has other problems and has lost value against the majority of major currencies. Eurozone inflation levels have been very poor for several years now, and this situation worsened this week as Consumer Price Index (CPI) data (a measure of inflation) came in below expectations. The figures arrived at –0.5% against a forecast of –0.4%.

The European Central Bank (ECB) has hinted at changing monetary policy. There could either be a change in interest rates, which would put the interest rate to a minus figure, or monetary stimulus such as Quantitative Easing (QE). QE is essentially pumping money into an economy in order to stimulate growth, the drawback is this creates a huge level of debt. Both of these options have the potential to weaken the Euro. At the moment, however, I believe the current Brexit situation outweighs the problems in the Eurozone.

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