This morning the GBP/EUR exchange rate jumped up towards the 1.138 level before falling back down to 1.132 in the afternoon. By the close of the day the rate had returned to the 1.135 level making it very up and down.

Sterling has been able to make gains against the Euro since the Bank of England decision on Thursday, in my opinion this is mainly due to the fact Brexit negativity has not being the main headline.

Mario Draghi Speech This Morning

The European Central Bank are doing their best to avoid a storm as they try to introduce new procedures to prevent a banking crisis taking place in the bloc. There will be a requirement for banks to hold €900bn to be able to pay for new unpaid loans. This was met with discontent from the Italian economy minister who suggested this will stop banks from lending money as the amount was so high they wouldn’t want to take the risk.

What is clear is that Italy’s debt problem hasn’t really been resolved, for the time-being it has just been swept under the carpet.

One of the main issues for the European Central Bank is how they could raise interest rates when a country is already struggling to pay back billions of Euros. If there was even a 0.25% hike in the Eurozone Italy’s bills would increase by nine figures. What looks more likely to become reality is that some of the existing debts will be written off as Italy are going to struggle to be able to pay any rates.

Over the next few months the Italian situation may flair up once again as the UK looks to start negotiating with EU over trade. Considering the UK is one of the largest contributors to the Eurozone any losses that are made will be further exaggerated as the UK’s net contribution will be removed.