Pound sterling soars against euro amidst Italy-EU budget showdown

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  • Italy just released its budget and its deficit target is triple its previous goal
  • The announcement of the proposal disrupted the market and has affected the euro’s value
  • The pound is experiencing steady gains because of the situation and the finalisation of the Brexit deal

The British pound is rising against the euro amidst the budget showdown between the European Union and Italy. Apart from the possibility of a Brexit deal being drafted on Monday, Italy’s budget proposal is destabilising the market causing steady gains for GBP, analysts say. After announcing their deficit target for 2019 which is 2.4% of the economy’s gross domestic product, Italian officials engaged in a war of words with the European Union. The announcement sparked swipes from the union as the proposed target is triple its previous goal. The target has also reportedly “unnerved” investors.

With Rome heavily indebted, the country’s officials have no other recourse, according to observers. Giovanni Tria, Italy’s finance minister said that the government will do what needs to be done to ensure that the current state of the market does not lead to a financial crisis. However, it is noted by Deputy Prime Minister Luigi Di Maio that officials will not betray their countrymen by changing the proposed budget.

A recent Bloomberg report shows that the euro is trading at approximately €1.145 against the pound. The latter is also trading higher against the New Zealand and Australian dollars. According to reports, the pound is now worth $2.033 and $1.851 respectively.

The Brexit deal is also contributing to the pound’s gains. While the outlook is relatively positive, Mizuho Securities’ chief foreign exchange strategist Kengo Suzuki warned: "We can't be too optimistic about the Brexit process. Even if a deal can be struck at an anticipated special EU summit in November, it has to get through the British Parliament."

Andrea Barnes
Andrea is Communications Manager at FXcompared. Prior to joining FXcompared, she worked as a communications consultant for companies seeking guidance with their social media, marketing and digital… Read more

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