Euro to Pound Gaining, Euro to US Dollar Falling

European Political Stability Growing: Long Term Euro Strength?

As a summary, the euro has been hit-and-miss of late with regards to it’s strength against its major currency counterparts. The euro to pound exchange rate for instance has been making consistent progress for the past two weeks shifting from 1.128 to today’s 1.108 at time of writing. This 2-cent gain has been more positive than the euro to USD exchange rates which has seen mid-market drop more than 1.5 cents from 1.136 to 1.12 in the last 12 days. That being said, the euro to pound rate could have been moving more as a result of Sterling weakness than euro strength as the pound has dropped more than 4 cents against the US dollar in the same time period as the Brexit deadline extension enters its last full week.

German Factory Virus Outbreak

Over the weekend Germany experienced its worst jump in virus cases as recent reports confirmed that 1000 workers have been infected with Coronavirus at the Tonnies meat factory which has led to 7000 friends and family members being quarantined for a minimum of two weeks. The recent outbreak has been the worst rise in cases in the EU so far and is expected to continue to increase as testing is still ongoing for all of its factory workers. The reason for the outbreak had supposedly been attributed to poor working conditions such as being cramped and having poor hygiene urging the government to consider the possibility of re-imposing the lockdown measures on the afflicted regions. Whilst this is an isolated incident, should case numbers continue to rise and Germany go back into a partial lockdown there could be severe implications for the economy and has the potential for currency weakness moving forwards.

Euro to Pound Positive Data Brings Optimism Back into the Markets

Changing to the economic data releases coming out this week, it will be a relatively quiet week with Tuesday and Thursday bringing anything volatility-causing to the table. The European Central Bank monetary policy meeting will provide its overview into the health of many different sectors on Thursday which could provide some additional firepower for the euro to pound rate as it currently sits at an 11-week high, not seen since late March. With rates moving towards the lockdown high of 1.06, clients holding euros and wishing to trade please contact your account manager here at Foreign Currency Direct for an evaluation of your trading positions.

The gloomy months following the initiation of multi-country lockdowns seems to be easing slightly with some recent encouraging data out recently. Whilst trying not to get ahead of ourselves it’s always worth noting good things when data releases so frequently provide depressing conclusions in these unprecedented times. Last week the German ZEW survey came in at 61 in comparison to the previous recording of 51. The survey conveys the current level of market sentiment and investing and with any results above 50 being positive, or bullish the Eurozone survey essentially suggests that economic conditions are on the rise for the latter half of 2020.

German and European Markit Purchasing Manager’s Index Composite is also published on Tuesday with previous recordings of 32 for both looking to rise to 44 and 41 respectively. Whilst still a negative, or bearish release, the growing positivity will be a breath of fresh air for the markets who are still reeling from the pandemic.

Spain Reopens Borders Without Quarantine

After months of being in a lockdown where not abiding by the strict measures could cost you up to €601 in fines, Spain has opened its borders to the majority of Europe as well as the UK which importantly comes without the two-week quarantine period that travellers had to undergo previously. The change means that people wanting to get away for a bit of sun on holiday or potential oversees property buyers can get out to view properties without the afterthought of a 14-day isolation period when they get back. As tourism typically rakes in roughly 12% of its overall GDP, the decision will be welcomed by holidaymakers and financial markets alike as the 3rd worst virus-hit EU nation begins to alleviate the economic strain the pandemic has created.

Despite the positivity, anxiousness and caution still hangs in the air as to be very alert to any spike in cases similar to what is currently being witnessed in Germany. The 1.5m social distancing rule is still very much in effect and governmental rules still require people to wear masks when entering shops or whilst on public transport. Either way, the announcement comes as a very welcomed change as events gradually fall back to normality pre-Coronavirus and whilst this hasn’t had any effect on the currency markets, people’s mental health will get a well needed rest with the reduced travel restrictions.

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