After weeks of debate and back and forth, yesterday we learned that the European Commission and Italian government have reached an agreement over the 2019 budget. The deal removes the possibility of Rome receiving an EU fine and could well help stop the rise of euroscepticism in Italy.
The euro strengthened as a result, sending sterling back below the €1.11 level to cap three consecutive gains against the pound. It is worth saying that the moves haven’t been significant by any means, but it could prove to be a notable trend as Brexit uncertainty continues to weigh on sterling. Italian stocks rallied, with the yield on Italy’s 10-year government debt falling to fresh lows.
On the flipside of this positive news, construction output in the eurozone fell to 1.8% in October from 4.8% the previous month. It is the lowest annual gain in construction output for six months. On a monthly basis, construction output dropped 1.6%. There are no major releases from the eurozone today, but tomorrow we will see the German Gfk consumer confidence for January. If recent releases are anything to go by, the figure could well be disappointing, although a modest drop to 10.3 from 10.4 the previous month is expected by the markets.