Euro Catapulted to 20-Month High Against USD, US Dollar Extends Slide on US Fiscal Stimulus Concerns

GBP/EUR Exchange Rate: Pound Tempered by Brexit Uncertainty

The Pound to Euro (GBP/EUR) exchange rate was left to trade in a narrow range through the second half of last week amidst lingering Brexit uncertainty.

This followed the conclusion of the latest round of trade talks between the UK and EU, following which UK’s chief negotiator, David Frost, spoke of ‘considerable gaps’ between the sides on many issues, while his EU counterpart Michel Barnier suggested a deal is still some way off.

After a slow start to this week, the GBP/EUR exchange rate moved sharply higher on Tuesday, although in the absence of any clear catalyst these gains could prove short lived.

This is particularly likely if July’s ‘intensified’ Brexit talks conclude this week without any meaningful progress being made.

GBP/USD Exchange Rate: Pound Bolstered by Stellar PMI Figures

The GBP/USD exchange rate rose steadily over the past week, climbing to its best levels since early March as it nears key resistance levels.

Through the second half of last week this upside can be attributed to the UK’s latest PMI release, as July’s preliminary figures highlighted an encouraging rebound in the economy as UK business activity rocketed to a five-year high.

Sterling then continued to push higher through the first half of this week, in spite of Boris Johnson’s warning to business to prepare for a second wave of coronavirus to hit the UK later in the year.

Looking ahead, the GBP/USD exchange rate looks poised to extend its recovery over the coming week, although in the absence of any notable UK economic releases its trajectory may slow somewhat.

USD/GBP Exchange Rate: US Dollar Sell-Off Intensifies

The USD/GBP exchange rate continued to trend lower over the past week, as investors continue to shun the US Dollar.

This was initially driven by positive market sentiment, with optimism over a potential coronavirus vaccine and the EU’s stimulus package, limiting the appeal of the safe-haven ‘Greenback’.

The US Dollar then found some temporary relief at the end of last week, amidst heightened tensions between the US and China.

However this support failed to carry over into this week, as uncertainty over US fiscal stimulus measures and expectations for a dovish Federal Reserve weighed on sentiment.

Looking forward, USD exchange rates may continue to weaken through the latter half of this week as economists forecast a dramatic collapse of growth in the latest US GDP figures.

EUR/USD Exchange Rate: Euro Soars to a 20-Month High

The EUR/USD exchange rate has continued to race higher over the past week as optimism surrounding the EU’s coronavirus recovery fund continues to bolster the Euro.

Also lifting the single currency was the publication of the Eurozone’s latest PMI releases at the end of last week. A stronger-than-expected reading in July’s preliminary figures helped bolster expectations for a solid rebound in economic activity in the second half of 2020.

So far this week, however, we have seen the Euro’s ascent begin to slow amidst a lull in notable economic data through the start of the session.

This is unlikely to be the case through the second half of the week, however, with a whole host of Eurozone economic releases to keep EUR investors on their toes.

Of these, the most high profile will be Friday’s GDP figures. Will a smaller-than-expected recession in the Eurozone in the second quarter help the Euro maintain its upward trajectory?

Matthew Andrews

Contact Matthew Andrews