The single European currency fell to a 6-week low on Tuesday after a senior lawmaker in one of Italy’s ruling parties, Claudio Borghi, said that most of the country’s economic problems could be solved if the former local currency was reintroduced.
However, Prime Minister Giuseppe Conte said the euro was “unrenounceable” and that the proposal was not negotiable.
In addition, the Italian government has set a budget with higher-than-expected deficit targets, leading to increased tensions with other EU leaders, concerning investors who want Rome to put its debt under control.
Most of the losses in the single European currency came after the comments made by legislator Borghi, the economic head of the right-wing party, pointing out that Italy would enjoy more favorable economic conditions outside the euro area. “We are dealing with a war of words, with the euro on one side and Italy on the other. … There’s a lot of headline risk about,” said the head of G10 strategy at Credit Agricole, Valentin Marinov.
The euro fell against the US dollar by 0.30% to hit its lowest level since August 21, as the EUR / USD traded in today’s session at $1.1505 per euro. According to senior currency markets experts, the euro has strong technical support at $1.15, a 50% correction of its rally from August to September. A break below this level could mean further weakening of the EUR to the $1.13 area.
The US dollar has risen against the euro since Wednesday, when the Fed raised interest rates as expected. The Fed said it expected another rate hike in December and another three next year, and one in 2020.
At this point, the main driver in the United States appears to be the Federal Reserve. Federal Reserve Chairman Jerome Powell on Tuesday hailed a “remarkably positive outlook” for the US economy, which he believes is on the verge of a “historically rare” era of very low unemployment.
The dollar index, which measures the strength and performance of the dollar against a range of major currency rivals, rose 0.25% to 95.531 points.
The Australian dollar, often seen as a measure of risk appetite, fell 0.51% to trade at 0.7186 Australian dollars, as the markets were affected by the concerns surrounding the euro area.
The British pound fell to a three-week low as the conflict over Prime Minister Teresa May’s plan in Britain escalated, with deep divisions at the conference of the ruling Conservative Party.
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