The Euro is trading weaker against the Pound and US Dollar in a day dominated by risk aversion. In Italy embattled Prime Minister Enrico Letta is battling to salvage his deteriorating coalition government whilst in the United States President Barrack Obama is trying to negotiate a rise in the nation’s debt ceiling.
The problems in Italy came after supporters of Silvio Berlusconi walked out of the flimsy coalition government in an attempt to force snap elections. Allies of Berlusconi withdrew from the walked out in protest ahead of a special committee meeting on October 4th which is expected to vote in favour of stripping the 76-year old Berlusconi of his seat in the upper house of parliament.
The ongoing political dispute has added to tensions in the Eurozone. Investors are still awaiting clarification on the formation of Germany’s coalition government in the wake of Chancellor Angela Merkel’s recent election win. Also knocking Euro confidence was the forecast made by economists that the regions unemployment rate will stay at record highs due to the ‘recovery’ not being as strong as expected.
“Protracted political impasse along with any delays in the formation of the grand coalition in Germany does not bode well for swift Euro-area policy decisions” said Fabio Fois, analyst at Barclays Plc.
Monday’s Consumer Price Index data added to the sense of disappointment following the mornings worse than expected German Retail sales data. The Index missed expectations by coming in at 1.1% for September year-on-year instead of the forecasted 1.2. The figure was down from the previous figure of 1.3%.
“Septembers Eurozone flash CPI figures confirmed that the ECB enjoys plenty of room to loosen monetary policy further. Headline inflation fell from 1.3% to 1.1%, the lowest reading since early 2010. Economic indicators still point to fairly anemic GDP growth in the near term.
‘With inflation likely to fall further below the ECB’s target of ‘below, but close to, 2% inflation’ in the coming months, the ECB has plenty of scope to loosen monetary policy further. At the very least, further action to boost liquidity in the banking sector looks increasingly likely” said an economist at Capital Economics.
Euro (EUR) Exchange Rates
As of 10:45 am
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3496
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8358
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.4458
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6305
The Euro/ Canadian Dollar Exchange Rate is currently in the region of: 1.3904