After the latest European Central Bank meeting disappointed, the GBP EUR exchange rate will look for further gains this week. The bank hiked interest rates by 50 basis points, but there was pushback on its new bailout tool. The Italian government was also on the verge of collapse last week, adding some weight to the euro.
The GBP to EUR opened the week at 1.1750 as it moves to recover the 1.1900 level that provided resistance recently.
Italian government collapses, opening the door to Meloni
The Italian Prime Minister resigned at the end of the week, putting the country on course for an election.
Italy heads for a snap election on the 25th of September after a fractured vote from recent coalitions. Mario Draghi resigned after a meeting with President Sergio Mattarella. Coalition allies of the leader withdrew their support by boycotting a confidence vote.
In the front running for the leadership is a new right-wing party led by Giorgia Meloni as the leftist and centre parties are left in shambles. Meloni stands on a platform that is opposed to immigration, abortion and the LGBT community. Her party is allied with the anti-migrant League, headed by Matteo Salvini.
A recent Politico poll put the two parties on 23 per cent and 15 per cent. Alongside the Forza Italia party, which gives a combined vote of 46 per cent and the ability to create a government, with Meloni in charge. Another recent poll by YouTrend said that Forza Italia and Meloni’s Brothers of Italy could win up to 220 of the 400 seats in the lower house and 108 seats in the Senate.
Mario Draghi was a former central banker installed to keep Italian politics locked in centrist policies. Still, the country could swing back to the right as living standards decline below 2006 levels. That could be problematic for the euro, especially with the central bank’s new bailout tool, which will need the approval of an Italian government.
Monday brings the IFO business climate index for Germany and the euro on the economic data front.
EU triggers ‘disappointing’ Northern Ireland Protocol action
The UK government said it is “disappointed” that the European Commission launched new legal actions over the Northern Ireland protocol.
The government added a “legal dispute is in nobody’s interest” and “will not fix the problems facing the people and businesses of Northern Ireland.”
The European Commission launched four new infringement procedures on Friday due to the UK failing to participate in “meaningful discussion” since February. The two parties embarked on long-winded talks for months but continually hit a stalemate. This will be an issue for the new leader of the British government.
Tory MPs saw a final ballot on Wednesday, with Trade Minister Penny Mordaunt knocked out with the fewest votes. The former Chancellor Rishi Sunak and Foreign Secretary Liz Truss will now take part in a six-week tour of the UK to win the votes of up to 175,000 Tory party members.