Euro exchange rate forecast: Salvini calls for snap election

Italian debt fears steepen

Italy’s political uncertainty a threat to Euro’s value

In today’s Euro exchange rate forecast, we’ll look at how Matteo Salvini, the leader of Italy’s League party has called for a snap election. This does not look like good news for the Euro. The League party is one half of a coalition with the anti-establishment Five Star movement, and Mr. Salvini has said the coalition is unworkable.

The two parties have clashed over several issues. However, the current talks over a high-speed railway between Turin and Lyon have resulted in fierce words between the two parties. Five Star strongly oppose the railway, due to its environmental impact and cost.

Italy currently has extremely high levels of debt, higher than its GDP (Gross Domestic Product). Brussels has threatened to impose a €3 billion fine, if there is not a real attempt by the Italian government to show a solid plan of repayment.

This has the potential to cause further strain on the relationship between Brussels and Rome, and has the clout to influence the value of the Euro. However, despite the situation with the Eurozone, it seems to be still outweighed by Britain’s problems surrounding Brexit. The Euro is close to a two year low against the US Dollar, yet still continues to make gains against Sterling.

Should I buy Euros now or wait? Eurozone GDP

Eurozone GDP is due out tomorrow and could cause volatility. This is expected to show little movement in quarter-on-quarter data, it is set to arrive the same as the last quarter at 1.1%. Germany’s GDP data is due out too, and it may be the case that there is a fall. Germany’s economic growth is predicted to drop to – 0.1% in Q2 from 0.4% in Q1. As Germany is the engine room of the bloc, this does have the power to weaken the Euro.

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