Mr. Luis de Guindos, Vice-President of the European Central Bank (ECB), said on Wednesday, 29 May, 2019 that Italy can get a lower credit burden on its loans if it clearly provides a more balanced state budget and complies with EU fiscal rules. In response to the possible solution to the long lasting dispute between the ECB and the Italian Government on the government bonds ECB’s financing, during the European trading morning on 30 May, 2019, at 8:31 CET, on Forex the euro (EUR) traded against the US dollar (USD) at a rate of US$1.1132 per EUR, with the current EUR strengthening of 0.03% of the exchange rate against the USD.
This dispute between the Italian Government and the ECB has been dragging on since the end of last year as part of the ECB’s reimbursement of government bonds of the euro area under the already-phasing-out quantitative easing program. The ECB requires Italy to strictly adhere to the established budgetary rules and steps to comply with the fiscal rules of the EU Member States. In this context, the Italian Deputy Prime Minister, Mr. Salvini, admitted that in the event of Italy’s failure to comply with the ECB, the ECB could impose a fine of EUR 3 billion. This fact, of course, is well known to investors, and a hint of a possible positive solution has aroused a better investor sentiment and the euro has slightly increased.
The euro and its exchange rate increase vis-à-vis other world currencies, and in particular the US dollar, is not only influenced by the ECB’s dispute with Italy on its state budget, but, according to analysts, the issue of leaving the United Kingdom of Great Britain and Northern Ireland for almost 3 years. Still a non-existent agreement within the UK political scene and the recently announced resignation of Prime Minister Theresa May on June 7, 2019 and conditional resignation from Prime Minister role until Conservatives find adequate subsitute, will certainly not add to stability and growth of the euro and the British pound.
The current exchange rate of GBP against USD during the European trading morning on 30 May, 2019, at 8:52 CET, was US$1.2633 per GBP. In the beginning of this month the exchange rate of the GBP/USD currency pair was above the US$1.30 per GBP. The exchange rate between the euro and the British pound has been fluctuating over the last few days, and on the stated day and time, the EUR/GBP currency pair traded on Forex market at GBP 0.8814 per EUR with the GBP daily decline of – 0.02%.