Today marks a week since two of the worst hit EU member states, Spain and Italy, reduced their lockdown measures in attempts to bring events back to a new normality whilst trying to alleviate any further strain on the Eurozone economy. The currency market remained very cautious and likely to be sensitive to any spike in cases over fears of a second wave being generated when national lockdowns were eased but as so far it has remained positive. Spain had announced its lowest daily death toll in months and was on track to continue. However, as we have seen previously with the pandemic, there has always been a delay between increased cases and the recording of said cases and so it could still be too early to evaluate the current effects that this may have on these two respective nations.
Comparatively, the UK had eased its lockdown last Monday too but had not been as well received, at least from the currency markets perspective as the Pound to Euro mid-market exchange rate dropped sharply from 1.14 to 1.12 with a 7 week low of 1.118 on Friday which was last reached at the end of March during peak virus time. Some of this market movement could have been attributed to the UK’s recently released GDP data which came in at a depressing 2% contraction which is the lowest quarterly reading since the 2008 financial crash. GBPEUR rates have tapered off today but with lingering market uncertainty surrounding the effects, or maybe even consequences of the widely-suggested prematurity of the lockdown easing, there is likely to be further volatility with any recently released statistics.
Euro to Pound Exchange rate overview
Additionally, from other currencies from last week, the EURUSD had not seen any particularly sizeable market movement with exchange rates moving within a 1.1 cent range from 1.077 to 1.088 with last week demonstrating gradual Euro strength over the US dollar to its current level at 1.081 today. In comparison to antipodean currencies, the EURAUD had a good week as it rose from 1.654 consistently to 1.689, a 3.5 cent gain with rates now placed at 1.677.
Europe Sees More Countries Relax COVID-19 Lockdown Measures
Germany and Luxembourg can now add themselves to the list of EU countries having withdrawn their lockdowns albeit as a partial reduction. The borders between the two countries have now reopened today as more countries look to try and reduce measures as German Foreign Minister Heiko Maas stressed the importance of a “Europe without borders”.
At least so far, there have been little significant consequences from the reopening of EU borders and so this may encourage more member states to relax their measures with concerns over their respective economic states and potentially ensuing recessions still very much a driving factor in these decisions. With Italy even opening up bars and restaurants could it be a telling sign that complacency or maybe even desperation are edging their way into government decisions?
Data Releases Could be Sensitive for the Eurozone This Week
Germany is well-known for being the economy powerhouse of Europe and thus when any significant changes occur economically to the nation, such as its previous hit to the car manufacturing industry, the euro becomes volatile and reacts accordingly to the statistics. This could follow a similar trend this week with Germany receiving its ZEW Financial Market Survey survey tomorrow which will provide the recent strength of institutional investor sentiment in accordance with market positivity. This is likely to give a good insight into what market experts believe is in store for the economy and could affect goods and service consumption.
Thursday will also see Germany’s Markit Composite and Manufacturing Purchasing Manager’s Index to show business and economic trading conditions. The last recording for this came in at 34.5 and with positive readings coming in at anything over 50, this could generate weakness for the single currency considering that the German economy has now been under duress from the virus for a longer period of time for this next release.
The last release for this week comes in the form of the European Central Bank (ECB) Monetary Policy Meeting Accounts on Friday and accompanied speech by ECB executive board member Philip Lane. This will be providing a comprehensive overview of the financial markets and any associated developments, a summary of economic analyses and insight into the understanding of monetary policy stance. This will allow the markets to get a feel for the reasoning behind any future changes by the ECB in regards to any of the aforementioned topics.
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