Euro hit by Draghi comments

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The euro has dropped sharply against other currencies after the head of the European Central Bank, Mario Draghi, said the bank could introduce more stimulus measures.

Speaking in Portugal, Mr Draghi said that if eurozone inflation did not return to its target of close to, but below, 2%, the bank could review its options in the "coming weeks".

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required," he said.

The stimulus measures could include more asset purchases by the bank or even a cut in interest rates.

"Will use all the flexibility within our mandate to fulfill our mandate – and we will do so again to answer any challenges to price stability in the future," Mr Draghi said.

Against the dollar, the euro reversed earlier gains to stand at $1.1192, down 0.2% for the day.

'First step' to stronger economic union

Economics commissioner tweets

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Roughly translated, this reads: "After a long night, an agreement that opens the way to the first eurozone budget! An important step towards a more robust economic and monetary union, but a first step. There is a lot left to go through to make this night a historic moment."

'Broad agreement' on EU budget

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Eurozone finance ministers have been in talks as part of attempts to agree a budget for the single-currency bloc.

France's finance minister Bruno Le Maire said an agreement has been reached on the broad outlines of a eurozone budget.

"We did tonight what we had set out to do: we've created a genuine eurozone budget," Mr Le Maire said after more than 12 hours of talks.

"For the first time, we have created an operational budget that will help eurozone countries to converge and become more competitive. It's a breakthrough," he told AFP.

"For the first time, we will start thinking about the future as a coherent bloc and coordinating our economic policies," he added.

Portuguese Minister of Finance and President of the Eurogroup Mario Centeno tweeted that a broad agreement had been reached for a Budgetary Instrument for Competitiveness and Convergence (BICC) - the technical name for the budget.

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'Ball in Italy's court' says Moscovici

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Italy could face disciplinary action over its failure to respect European Union spending rules.

The European Commission found that Italy's public debt stood at more than 130% of GDP in 2018 - far above the 60% limit which EU rules requires.

The disciplinary procedure could ultimately result in an unprecedented fine of more than €3bn (£2.6bn).

European Economics Commissioner Pierre Moscovici has been speaking about this subject today.

He said: "No one should be in doubt that we will apply those rules if the criteria are not fulfilled".

"So now clearly the ball is in Italy's court. We need to see a credible path for 2019 as well as 2020. We stand ready to take into account any new elements that Italy may put forward, but let's not waste time".

Euro rallies against the dollar

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The euro popped higher against the dollar, after the ECB announced its latest position on interest rates.

It traded as high as $1.1272, up more than a third of a cent.

Analysts had thought that ECB chief Mario Draghi would have hinted at further measures to boost the eurozone economy.

Instead he said that rates would remain at the current level until well into next year.

Markets pricing in a cut

Chief Economist at Investec, London

Italian debt 'major risk' to Eurozone

IMF managing director Christine Lagarde
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IMF managing director Christine Lagarde

The International Monetary Fund (IMF) is apparently preparing a report stating that Italy's debt presents a "major risk" to the Eurozone economy, a source have told Reuters.

Later today, the European Commission is expected to announce that a disciplinary procedure against Italy over its debts will be needed.

Measures such as financial sanctions and stricter monitoring of Italy's finances could occur as a result, starting as soon as August.

The source also said that the IMF sees the UK crashing out of the EU without a Brexit deal as being a key risk too, because many economic sectors are still not prepared for such an eventuality.

Economic sentiment diverges

Chief economist at Panmure Gordon tweets:

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The European Commission's economic sentiment gauge rose to 105.1 in May from 103.9 in April - although the business climate indicator fell.