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Italian election to spur EUR losses?

business-articlesItalian election to spur EUR losses?
  • Political uncertainty to rise ahead of Italian election
  • UK construction PMI may weaken GBP
  • Canadian GDP forecast to climb
Italy goes to the polls

Today will be the last day of trading before Italy goes to the polls this weekend to vote in the country’s general election.

Analysts are currently forecasting that the vote will result in a hung parliament, with Silvio Berlusconi’s right wing alliance expected to claim the largest proportion of the vote.

A hung parliament is unlikely to inspire confidence in investors, with the possibly of months of political wrangling in coalition talks likely to dent the appeal of the euro.

Markets are also likely to fear that this back-and-forth could also delay the implementation of much needed economic reforms in the country as Italy lays burdened with the second largest debt ratio within Europe.

On top of this an unstable political landscape in Europe’s third largest economy could prompt the European Central Bank (ECB) to adopt a more dovish outlook in the future, further denting the appeal of EUR.

UK construction activity likely to remain muted

The UK will publish its latest construction PMI this morning, which may see the pound fall lower at the end of the week’s session.

While economists expect last month’s index of construction activity to have ticked up from 50.2 to 50.7, it is unlikely to have much positive impact on Sterling.

This is because the index will still fall dangerously close to the 50 point mark which separates growth from contraction, suggesting that the sector will only see marginal expansion in February.

However, an unexpectedly strong reading isn’t guaranteed to provide much lift for GBP either as the construction sectors accounts for only a small portion of the UK’s overall economic growth.

Uptick in GDP may bolster CAD

Canada will release its fourth-quarter GDP figures this afternoon, possibly boosting the appeal of CAD and granting investors their first look at how all the G7 economies fared at the end of 2017.

Current forecasts suggest that domestic growth will have ticked slightly higher in the last quarter, rising from 0.4% to 0.5%.

The annualised figures meanwhile are expected to show that growth rose from 1.7% to 2% in 2017.

Economists point to the upswing in oil prices at the end of 2017 as a likely contributing factor in the uptick in growth, with robust household consumer spending also likely to be a key source of growth.

Upcoming Data

Friday, 2 March, 2018
09:30                       GBP Manufacturing PMI
13:30                       CAD Q4 GDP
Sunday, 4 March, 2018
EUR Italian General Election (results expected on Monday)
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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