EUR/USD is currently bouncing off a 1.1312 low (31 October), heading toward 1.1430 short-term. Italy’s deficit budget proposal of two weeks ago has pushed the single currency down against major currencies.
Meanwhile, the German Bund spread continues to widen as investors handicap Italy’s bankruptcy risk: at 2.92, its highest in 30 months. If Italy does not fall in line with the European Union’s budget guidelines, it will face fines as high as 0.20% of GDP, pushing the government further into bankruptcy, which would weigh on the EUR.
The EU Commission is waiting for an Italian budget re-submission, due for 23 November. But Prime Minister Giuseppe Conte says there is alternative and that no changes will be made. The Commission will rule on all EU-members’ budgets on 21 November.
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by By Vincent Mivelaz