EUR/USD has posted small gains in the Wednesday session, after considerable losses on Tuesday. In the European session, the pair is trading at 1.1411, up 0.37% on the day. In economic news, there are no eurozone releases. There are a host of key events in the United States. Durable goods orders are expected to improve to 0.4%, while core durable goods orders are forecast to post a sharp drop of 2.2%. The U.S. will also release unemployment claims and UoM consumer sentiment. On Thursday, the ECB releases the minutes of its policy meeting in October and the eurozone publishes consumer confidence.
The Italian budget continues to be a bone of contention between Rome and Brussels, and the ball is now in the court of the EU, in particular, the European Commission, which is in charge of EU regulations. The Commission is expected to issue a report on Wednesday that Italy’s draft 2019 budget is in breach of EU deficit and debt rules. Italy’s debt stands at a staggering 132% of GDP, and the EU is concerned that the high-spending budget could cause another debt crisis in the eurozone. The EU could impose severe financial sanctions on Italy, with fines of up to 0.2% of the country’s GDP. Senior Italian officials have vowed not to bend on the budget, but may have to reach a compromise with Brussels.
The ECB remains on track to wind up its stimulus package at the end of the year, but the economic slowdown gripping the eurozone could mean a change in monetary policy. German data is often viewed as a bellwether for the eurozone, and a rare decline in German GDP in the third quarter is an alarm bell that the euorozone economy has hit some headwinds. On Tuesday, ABN-Amro, one of the largest banks in the Netherlands, said that it does not expect the ECB to raise interest rates before March 2020.
