Currencies: Euro rebounds after report Italy will play by EU’s budget deficit rules


The euro climbed against other currencies Wednesday on reports Italy may yield ground over a budget stalemate with the European Union.

The common currency EURUSD, +0.3117% EURUSD, +0.3117% rose to $1.1584 from $1.1549, making headway during the Asian trading session after a report in Italian daily newspaper Corriere della Sera that the government’s budget deficit target will be set at 2.4% of GDP in 2019, but decline to 2.2% in 2020 and 2.0% in 2021.

“We expect further gains as the European session begins,” said Jasper Lawler, Head of Research at London Capital Group, in a note to clients.

Italian officials had previously clashed with Brussels over the budget deficit target, which had stoked fears of another crisis in the region and put pressure on Italian stocks and bonds.

“Brussels still need to approve Italy’s budget plans by the middle of the month, so we could still see some jitters until the ink has dried on that approval,” said Lawler.

The start of the week has been marked by back and forth comments between EU and Italian officials, with European Commission President Jean-Claude Juncker at one point warning of a risk of another Greek debt crisis if Italy didn’t dial back its deficit spending plans. Tuesday marked a particularly fraught day for the euro amid budgetary squabbling.

Read: For Italy, the euro is ‘unrenouncable,’ its prime minister reassures

The ICE U.S. Dollar Index DXY, -0.22% traded at 95.295, down 0.2% on the day so far.

The pound GBPUSD, +0.1618%  was firming up, last changing hands at $1.3001 from $1.2980. U.K. Prime Minister Theresa May will make a keynote speech at the Conservative party conference on Wednesday, with plenty of attention focused Brexit-related comments.

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