The euro recovery is gaining traction on Monday after a steep decline late last week. EURUSD is extending gains above 1.13 but lacks momentum to challenge the 1.14 handle so far. The local demand growth is due to some positive developments in Italy. In particular, Italy's deputy prime minister Luigi Di Maio hinted at a possible budget deficit reduction.
As being reported, the country’s government is discussing reducing the budget deficit to 2.0% - 2.1% from the current goal set at 2.4%. The officials will likely meet later today to discuss the reduction. In this context, the single currency could receive a relief should the government really decide to make concessions to the EU.
In a wider picture however the euro’s attractiveness is still at risk against the backdrop of increasing signs of slowing growth in the region. This in turn may weaken the prospects of rising rates by the ECB in 2019. As such, it’s still too early to call a bottom and the downside risks still persist for the euro.
The upcoming ECB President Mario Draghi's testimony before the European Parliament Economic and Monetary Affairs Committee will be the key event for the currency today. Any signs of “dovishness” on the economic or political developments in the region could undermine the current recovery.
Technically, the pair needs to stay afloat above the 1.13 threshold which is the major pivotal point for EURUSD in the short term.