The euro is currently looking fragile due to the lack of emergency funding for the Coronavirus pandemic. Spain and Italy some of the worst hit nations are still in desperate need of funds but some members of the bloc are reluctant to take on further debt.
Germany, the engine room of the EU are not on board when it comes to taking on a collective debt, through Corona bonds. The Netherlands also share the same stance.
Their stance is justified due to the huge debt situations that already exist. Italy for examples debt to GDP ratio is now well over 100%. Let us also not forget the situation in Greece with the International Monetary Fund (IMF) having to bail them out.
There has been some funds pumped into the Eurozone economy to the tune of €700bn and although this does seem like a ridiculous sum it is meager in comparison to the US where $3tn has been agreed in emergency funding.
If we do see funding agreed then we could see the euro to pound interbank exchange rate higher .
The tussle is doing little for EU relations. The bloc now seems to be fracturing worse than ever before. It will be interesting to see if any EU members follow the path of the UK and hold a referendum to leave following the Corona virus situation. If another member of the bloc were to signal the desire to leave this could have a huge impact on Euro value. If a dominoe effect were to occur the eU itself could be in danger of breaking up.
If you are trading GBP/EUR we have seen 1.15 hold up as a resistance point now for over three weeks. Every time 1.15 is breached GBP/EUR quickly retracts.
So if you are purchasing euros in the short term you could be looking at the high 1.14s.
Although the euro has its problems, sterling is not much better off. Britain now has the worst rate of infection and death toll in Europe. A situation that has arisen, which has been seen as reflective of the the lack of preparation and funding to control such an outbreak.
PM Boris Johnson is currently in a catch 22 as he needs to get the economy back up and running, but at the same time can not risk a second wave.
Brexit is also yet to be sorted out. A deal must be done in principal by the end of June which seems a very tall order considering the Corona situation. It maybe the case Boris intends to strike a hard bargain with Brussels while the in house fighting continues and are in what could be considered a weak position. A dangerous game considering the time scales involved. He has stated he has no intention of having an extension which will not sit well with investors a s while a no deal scenario remains a possibility Sterling will remain fragile.
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