Business Currency News: EUR Gains on €750bn EU Recovery Fund, USD Rocked by Worst Civil Unrest Since 1968

GBP/EUR Exchange Rate: Sterling Strengthens Despite Brexit Risks

The Pound to Euro (GBP/EUR) exchange rate has found modest support over the past week, with the pairing ticking higher in spite of growing concerns surrounding Brexit.


As the last round of talks before a key summit later in the month get underway, hopes for a breakthrough are slim despite reports the EU may be willing to make concessions on fisheries.


While the EU appears willing to compromise, the rhetoric coming from Downing street suggests that the UK government remains 100% committed to its demands, including its promise not to extend the Brexit transition period, regardless of the disruption caused by the coronavirus.


Looking forward, any further upside in the Pound looks limited this week so long as Brexit negotiations are in deadlock.


GBP/USD Exchange Rate: Pound Buoyed by Plans to Reopen UK Economy

The GBP/USD exchange rate has made steady gains over the past week, thanks in part to the UK government’s plans to ease its lockdown measures.


Boris Johnson’s announcement that non-essential shops can reopen from 15 June buoyed Sterling sentiment, with hopes this will increase the chances of a V-shaped recovery in the UK.


However, these gains were tempered somewhat by ongoing speculation that the Bank of England (BoE) is exploring the possibility of introducing negative interest rates.


Looking ahead, GBP investors are likely to keep a close eye on domestic coronavirus developments in the coming week as any uptick in new cases could side-line the government’s plan to reopen the economy.


USD/GBP Exchange Rate: Widespread Civil Unrest Dents the US Dollar

The USD/GBP exchange rate slumped to a new six-week low in the past week as the US has been rocked by widespread civil unrest.


Tens of thousands of people have taken to the streets in cities across the country as the death of George Floyd in police custody has spurred demonstrations over racial inequality and police brutality in the US.


While the protests have been mostly peaceful, some have erupted into violence and rioting, leading to curfews being imposed and clashes between protestors and the authorities.


Further limiting the appeal of the safe-haven US Dollar has been a broad upswing in market sentiment, amidst hopes for a coronavirus vaccine and a sharp recovery in global growth.


Moving forward, USD investors are likely to keep an eye on the protests ahead of this week’s payroll report, which is expected to report that the US unemployment rate neared 20% in May.


EUR/USD Exchange Rate: Euro Soars on EU’s Proposal for Coronavirus Fund

The EUR/USD exchange rate has been catapulted to a new seven-week high in recent trade, on the back of broad weakness in the US Dollar as well as hopes for a new €750bn coronavirus recovery fund from the EU.


Dubbed the Next Generation EU plan by the European Commission, the ambitious fund has been hailed as ‘Europe’s moment’ by EC President Ursula von der Leyen. Added to the reopening of much of the Eurozone, hopes have been bolstered for a relatively speedy recovery in the bloc.


Moreover, the new fund has helped dispel some of the concerns that the EU’s financial response to the Covid-19 outbreak had been lacking.


The European Central Bank’s (ECB) latest policy decision is still to come this week.


While the ECB is forecast to leave interest rates unchanged, economists expect the bank to expand its Pandemic emergency purchase programme (PEPP) by an estimated €500bn, with the additional support to the Eurozone economy likely reflecting well on the Euro.

Matthew Andrews

Contact Matthew Andrews