It could prove to be a particularly interesting start to the week for euro exchange rates, with the latest round of government-funded multinational bailouts announced over the weekend, holding the potential to play on investor appetite.
Indeed, French finance minister Bruno Le Marie announced on Friday that France and the Netherlands have reached an agreement with European heavy weight Air France – KLM to fund a €10 billion relief package to help keep the group alive as the economic pressures emanating from COVID-19 continue to mount.
The bailout agreement is the 3rd multi-billion euro deal of its kind since the outbreak, however experts are expecting an acceleration of further government handouts throughout the month of May. For example, Renault SA is next in line for a bailout package with an estimated €5 billion package due to be announced imminently.
Of course, we have seen similar support offerings from governments around the world, but there could well be extra scrutiny over the European bloc given the number of members struggling to comply with the financial standards laid out by the commission even before the Coronavirus took hold of global markets.
Will GBP EUR push past 1.15 this week?
It will be interesting to see how the markets react ahead of tomorrow’s Bank lending survey produced by the European Central Bank for example. The survey provides a clear risk assessment for lending conditions across the Eurozone and can often pinpoint areas where the bloc is overstretched. The European Commission will also release its latest business confidence update on Wednesday which could prove to be a trend setter for EUR GBP exchange rates as the week goes on.
We saw in the States how quickly faith amongst investors returned once the Federal Reserve committed to providing unlimited support to the US lending sector. Perhaps we might see a similar reaction within European markets as a result of this weekend’s show of support?
Those with a currency requirement involving the euro will also have tomorrow’s consumer confidence release from France to consider, along with potentially pivotal unemployment figures for Spain. As one of the hardest hit nations by the virus, particularly high levels of unemployment numbers here could drive further volatility to euro exchange rates.
Finally, on Wednesday the markets will turn to Germany’s inflation levels for April. Given that Germany is Europe’s leading economy, any fall from grace here could halt a change in trend in favour of the euro and could potentially help the pound continue its rise towards the 1.15 mark on interbank exchange rates. Now that sterling seems to have put last week’s oil crash behind it, it does seem to be enjoying a fair amount of support from the markets, climbing by over 1.2% over the course of the past 7 days to reach some of the best levels since the start of March.
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