Euro Weak as Clash Between Italy & EU Continues

The euro was weak against most of its major currencies today due to the clash between Italy and the European Union over Italy’s budget deficit target. The shared 19-nation currency managed to gain on the Great Britain pound, which was also extremely weak due to Brexit concerns.
The Italian government rejected EU’s request to review the budget, sending a letter on Monday that was defending the increase in spending as a measure to reignite economic growth and avoid recession. It is widely expected that the European Commission will officially reject the budget, asking Italy to resubmit it. While the 2.4% deficit target is within the EU spending rules, the Commission thought that the sharp increase from the 1.8% deficit target set by the previous government was too extreme.
Moody’s Investors Service downgraded Italy’s credit rating to Baa3 from Baa2 on Friday. The higher budget shortage target was one of the reasons cited by the agency for the downgrade. On the positive note, the outlook for the rating was stable.
EUR/USD declined from 1.1515 to 1.1473 as of 17:22 GMT today. EUR/CHF fell from the open of 1.1464 to 1.1430 after rising to the daily high of 1.1501 earlier. At the same time, EUR/GBP climbed from 0.8805 to 0.8844.

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