The EUR/USD dipped under 1.1530, a level that supported it in September and is trading at levels last seen in August. It is a one-two punch for the world's most popular currency pair.
The European Union does not like the new Italian budget and its 2.4% deficit, above 2% set by the Commission. Comments by EU Commission President Jean-Claude Juncker and others weigh on Italian stocks, bonds, and the common currency. Italian ministers will convene later in the day. So far, they have been defiant and insist on pushing forward with the tax cuts and the Citizens' income program.
5-Star Leader Luigi di Maio said that France would not be treated this way. Claudio Borghi, the head of the budget committee and a Lega member said that if Italy had its currency, it would “solve most of Italy's problems.” He later had a more conciliatory tone. The clash with Europe continues.
The US Dollar continues gaining strength across the board. This is a result of the tightening policy by the Federal Reserve. After hiking rates last week, the Fed intends to increase rates four more times until the end of 2019. The ISM Manufacturing PMI for September came out at 59.8 points, slightly below expectations but still reflecting robust growth.
Fed Chair Jerome Powell will speak later in the day, at 14:45 GMT. He will talk about the outlook for employment and inflation, a topic relevant to markets. On the other hand, Powell made several public appearances of late and may find it hard to surprise markets.
Euro-zone PPI is expected to rise once again and may have a minor influence on the Euro. However, developments in Italy will likely have a more significant effect.
Another factor for the euro is Brexit. The British government is due to present new ideas for resolving the issue for the Irish border. Former Foreign Minister Boris Johnson may throw his hat into the ring and present his candidacy to replace Prime Minister Theresa May. The Euro often moves on Brexit headlines, albeit the movements are minuscule in comparison to those seen in the GBP/USD.
