Falling Coronavirus Cases Buoys the Pound, ECB Stokes Volatility in the Euro

GBP/EUR Exchange Rate: Sterling Rallies as Domestic Coronavirus Cases Drop

The Pound Euro (GBP/EUR) exchange rate has steadily climbed over the past week, with Sterling sentiment being buoyed by what appears to be a sustained drop in new coronavirus cases in the UK.

Daily infections have now dropped for six consecutive days, with new cases currently standing at around 25,000, with the fall, most importantly, coming without a national lockdown.

The fall in new cases comes as a major relief to GBP investors, many of whom had raised doubts over the sustainability of England’s recent reopening, amidst warnings that daily infections could top 100,000 or even 200,000 cases a day.

However health experts have warned that the effects of England’s full reopening is yet to feed through into the data, which could trigger another spike in cases and drive the Pound lower again in the coming week.

GBP/USD Exchange Rate: Pound Bolstered by Brexit Optimism

The GBP/USD exchange rate is currently trading just shy of a two-week high amidst fresh Brexit optimism.

This follows the news that the EU has suspended legal action against the UK for its breaches of the Northern Ireland protocol.

It’s hoped the pausing of legal proceedings will help to quell tensions between the two sides as they explore alternative solutions.

However the rise in the Pound US Dollar exchange rate hasn’t been without its hurdles, with the pairing facing some headwinds at the end of last week as the UK’s latest PMI figures disappointed.

Looking ahead, with UK economic releases thin on the ground over the next week, any movement in GBP/USD is likely to be driven by Brexit and domestic coronavirus developments.

USD/GBP Exchange Rate: Fluctuating Risk Appetite Infuses Volatility in the US Dollar

The US Dollar has traded in a wide range over the past week, mostly as a result of fluctuating risk appetite.

This saw the ‘Greenback’ maintain a broadly positive trajectory through the second half of last week as a prevailing risk-off mood prompted investors to favour the safe-haven currency.

However USD exchange rates have subsequently faltered this week, as despite ongoing uncertainty surrounding the global economic recovery, market risk appetite has seen a modest improvement.

Also undermining the US Dollar was the publication of the latest US durable goods orders, which printed well below expectations last month.

Looking ahead, all eyes will be on the Federal Reserve as it concludes its July policy meeting later this evening. No policy changes are expected from the Fed this month, but it could propel the US Dollar higher if the bank’s forward guidance makes any mention of potentially tapering its stimulus programme in the coming months.

EUR/USD Exchange Rate: Euro Rocked by ECB Rate Hints

The Euro US Dollar exchange rate was infused with some notable volatility in the second half of last week’s session, following the conclusion of the European Central Bank’s (ECB) latest policy meeting.

This saw the Euro initially spike as the ECB appeared to strike a less dovish tone than expected, before quickly tumbling again as the bank made it clear that interest rates will remain on hold for the foreseeable future.

EUR exchange rates began to rebound toward the end of last week’s session however, as the Eurozone’s latest PMI figures pointed to the bloc’s private sector enjoying its strong month of growth in over 15 years.

This upside in the EUR/USD exchange rate then accelerated this week, helped by both a pullback in the US Dollar as well as the announcement that the EU has now provided at least one vaccine jab to over 70% of adults.

Turning to the second half of this week, we are likely to see the Eurozone’s latest GDP figures be the primary focus for EUR investors. Will a solid rebound in growth in the second quarter help to extend the Euro’s recovery?