Euro Marginally Higher As Dollar Weakens
The euro made its way higher on Thursday due in large part to a weaker dollar. The common currency traded at $1.2788 at 8:00 GMT despite a growing dispute between the EU and France over the nation’s 2015 budget.
Weak economic data out of the U.S. helped push the greenback lower, as most saw the figures supporting the Fed’s case for delaying an interest rate hike. Retail sales fell 0.3 percent in September, and a separate report showed that producer prices were down 0.1 percent in September.
Meanwhile, the eurozone looked to be in for drawn out discussions regarding individual nations’ 2015 budgets as both France and Italy forecast deficits much higher than EU mandates allow.
Both are struggling with high unemployment and a sputtering economy, and say that tax hikes will further impede business activity.
The Wall Street Journal reported that Italian Prime Minister Matteo Renzi joined Paris in asking the EU for more budget flexibility, explaining on Wednesday that a lack of demand would be exacerbated by more government cuts.
Brussels will have the opportunity to reject the budget if it is not deemed within reasonable limits, something that several northern European countries have called for.
Germany, among others, has been very vocal about the fact that structural reforms and budget tightening is the only way to ensure the eurozone doesn’t fall into another period of financial instability.
Moving forward, markets will be keeping a close eye on the developments between the European Commission and France and Italy as the commission recently took on a larger role in streamlining the bloc’s finances. As part of the eurozone’s strategy to avoid another financial meltdown, all members agreed to give the European Commission the power to oversee individual nations’ finances. Now, the commission’s power will be put to the test as both France and Italy look to see how far they can bend the rules.
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