The euro declined against its major counterparts in the early European session on Friday, after the European Commission said Italy’s 2019 budget draft is in serious breach of EU budget rules.
In a letter to the Italian government, Commissioners Valdis Dombrovskis and Pierre Moscovici wrote that the government’s budget plans represent “an obvious significant deviation” from recommendations adopted by the Council for 2019.
“With Italy’s government debt standing at around 130% of GDP, our preliminary assessment also indicates that Italy’s plans would not ensure compliance with the debt reduction benchmark agreed by all Member States,” the letter stated.
Sentiment faded as Chinese growth figures missed expectations, suggesting that there was downward pressure on the world’s second-largest economy due to the ongoing Sino-U.S. trade war.
China’s GDP climbed an annual 6.5 percent in the third quarter of 2018- shy of estimates for 6.6 percent and down from 6.7 percent in the previous three months.
Industrial production climbed 5.8 percent year-on-year in September, shy of forecasts for 6.0 percent and down from 6.1 percent in August.
However, retail sales climbed an annual 9.2 percent and fixed asset investment gained 5.4 percent to beat forecasts.
The currency was higher against its major counterparts in the Asian session, with the exception of the pound.
The euro retreated to 1.1402 against the Swiss franc, not far from an 8-day low of 1.1398 hit at 5:00 pm ET. The next possible support for the euro is seen around the 1.12 level.
The euro weakened to 1.1433 against the greenback, its lowest since October 9. This may be compared to a high of 1.1470 hit at 2:05 am ET. If the euro falls further, it may find support around the 1.13 area.
Pulling away from a high of 0.8803 hit at 2:00 am ET, the euro reversed direction and declined to 0.8778 against the pound. On the downside, 0.86 is possibly seen as the next support level for the euro.
Data from the Office for National Statistics showed that the UK budget deficit reached its lowest September level in 11 years.
Public sector net borrowing excluding public sector banks was GBP 4.1 billion, which was GBP 0.8 billion less than in September 2017. This was the lowest September deficit since 2007.
The single currency slipped to a 9-day low of 1.4938 against the loonie, compared to 1.4984 hit late New York Thursday. The euro is seen finding support around the 1.47 mark.
The euro declined to near a 2-month low of 1.7398 against the kiwi and more than a 2-week low of 1.6090 against the aussie, off its early highs of 1.7557 and 1.6157, respectively. The euro is likely to find support around 1.71 against the kiwi and 1.58 against the aussie.
The euro pared gains to 128.56 against the yen, from a high of 129.03 hit at 2:00 am ET. The euro is poised to target support around the 127.00 level.
Data from the Ministry of Internal Affairs and Communication showed that Japan consumer inflation fell 1.2 percent on year in September.
That was shy of expectations for an increase of 1.3 percent, which would have been unchanged from the August reading.
Looking ahead, Canada retail sales for August and consumer inflation for September, as well as U.S. existing home sales for the same month are set for release in the New York session.
Bank of England Governor Mark Carney will speak at the Economic Club of New York at 11:30 am ET.
Federal Reserve Bank of Atlanta President Raphael Bostic speaks about the economic outlook in Georgia at 12:00 pm ET.