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Euro to Pound (EUR/GBP) Exchange Rate Static on Italian Budget Rejection Warning

Fears for Worsening Italian Budget Crisis Keep EUR/GBP Rate Steady

The Euro (EUR) has traded in a narrow range against Pound Sterling (GBP) today, with Italy’s continued budgetary issues limiting demand for the single currency.

European Union Budget Commissioner Gunther Oettinger has been in the spotlight, having predicted a negative development in the ongoing Italian budget crisis:

‘It is my personal opinion that based on the figures, it is very likely that we [will] have to ask Italy to correct the draft budget.’

The problem at the heart of the Italy-European Commission (EC) clash is that Italy has submitted a budget that exceeds spending limits.

Italy’s coalition government is Eurosceptic, so the potential rejection of the budget by the EC only risks increasing divisions between Italy and the rest of Europe.

Recent discussions between the EC and the Italian government have been acrimonious, which has made finding a solution a more difficult prospect.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Unchanged by UK Retail Sales Slide

The Pound (GBP) has shown resilience and held steady against the Euro (EUR) today, following the news that UK retail sales activity slowed in September.

To the disappointment of GBP traders, last month’s figures showed a larger-than-expected monthly slowdown while annual readings fell instead of rising as forecast.

Looking into the causes of these disappointing results, Hargreaves Lansdown Senior Economist Ben Brettell said:

‘The monthly data is notoriously volatile, but the year-on-year figure of 3.0% undershot economists’ forecasts of a 3.6% rise, and September’s drop dragged the three-month number down to 1.2%, the third fall in a row.

‘It looks like consumer spending – along with the weather – peaked in early summer and has been declining ever since.’

Outside of this disappointing data, today’s other UK news has been that there could be an extension to the Brexit transition period.

This possibility came from yesterday’s EU summit and might make securing a good Brexit deal easier, despite the uproar that it has provoked among pro-Brexit MPs.

Euro to Pound (EUR/GBP) Exchange Rate Forecast: Will BoE Governor’s Speech Boost Pound Sterling?

This week’s last economic event will come on Friday afternoon, when Bank of England (BoE) Governor Mark Carney gives a speech in New York.

As head of the UK central bank, Mr Carney’s remarks carry a certain amount of weight and can influence Pound Sterling demand.

If Mr Carney discusses monetary policy and backs a 2019 interest rate hike then the Pound could rise sharply against the Euro.

Wednesday’s news of slowing inflation has put a rate hike next year into doubt, so reassurance from Mr Carney could support the GBP/EUR exchange rate.

Beyond this closing news, next week’s first main data releases will be UK and Eurozone ecostats out on Tuesday.

The Confederation of British Industry’s (CBI) measures of business optimism and industrial activity could weaken the Pound, as both readings are expected to decline.

The later Eurozone consumer confidence estimate could cause a EUR/GBP exchange rate rise, as it is tipped to show better sentiment levels during October.