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Euro to Pound (EUR/GBP) Exchange Rate Dips on Italian Spending Threat

Pound Euro exchange rate forecast

Plans for €80bn Spend on Italian Infrastructure Drag EUR/GBP Exchange Rate Down

The Euro (EUR) has fallen against the Pound (GBP) today, trading at a level of £0.8951.

This deterioration comes on the news that the Italian government could be looking to spend around €80bn on upgrading its national infrastructure.

This push comes after last week’s tragic bridge collapse in Genoa, but despite good intentions is reportedly in violation of European Union budgetary rules.

The state of Italy’s infrastructure was thrust into the spotlight when the fatal bridge collapse sparked fears that more structural failures could be waiting to happen.

EU officials may hold off on granting Italy’s budgetary measures because despite the size of the Italian economy, the country is also heavily in debt.

In essence, the vast Italian spending proposal threatens to destabilise the EU, despite the job creation and safety benefits that such work could bring.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Rises despite Falling Business Confidence

Today’s Pound Sterling to Euro (GBP/EUR) exchange rate rise is mainly down to the Euro’s present weakness, rather than any particular GBP strength.

The latest UK economic news has come from the Institute of Directors (IoD) and has shown a decline in confidence among national business leaders.

The most recent iteration of the IoD survey suggests that economic sentiment is at its lowest point in 2018 so far, with a net drop of -16% for the confidence reading.

As IoD Senior Economist Tej Parikh emphasises, this is a step back compared to previous survey findings:

‘Despite cautious optimism emerging amongst the business community earlier in the year, any momentum appears to have dwindled.

‘We’re heading back to the levels of pessimism we saw before progress was made on phase one of Brexit talks.’

Euro to Pound Sterling Exchange Rate Forecast: Are EUR/GBP Gains ahead on UK Deficit Data?

Looking ahead, the Euro (EUR) could stage a recovery against the Pound (GBP) on Tuesday if the next UK economic data ends up disappointing Pound traders.

Tuesday’s contributions will consist of a borrowing figure for July, along with a Confederation of British Industry (CBI) industrial orders figure for August.

The UK borrowing measure is tipped to show a smaller deficit, although a forecast-matching shift would still leave the UK owing billions.

Tuesday’s other UK data, the CBI industrial orders reading, could also weaken the Pound and prompt a EUR/GBP exchange rate rise if it shows a slowdown.

This week’s next major Eurozone news isn’t out until Thursday, when preliminary Eurozone PMI and consumer confidence figures will be released.

These are expected to show a rising overall Eurozone PMI, as well as an increase in services sector activity.

The Euro could firm on such results, although lower manufacturing sector activity and poor consumer confidence levels could limit any EUR/GBP exchange rate gains.