Currently, mid-market levels for euro to pound is at a 2-month high at 0.897 on midmarket rates showing the recent strength for the single currency whilst euro to US dollar has been making continuous inroads against the USD as the start of May at 1.08 has grown almost 3.5 cents to 1.113 on today’s trading.
Further lockdown Easing With Reduced COVID-19 Cases
European lockdowns are continuing to relax as more countries now continue to ease or lift their restrictions all together. Greece is set to reopen in two weeks time to 29 countries but predominantly to EU member states with the list not including the UK. It comes as the majority of EU countries are still receiving a gradual decline of COVID-19 cases. Bars and restaurants are also beginning to open up again after more than 2 months of inactivity which should help with the recovery of the financial crisis set to disrupt the eurozone as the Financial Times pushed predictions for total economic contractions to 15% by the end of the year. Christine Lagarde, head of the european Central Bank (ECB), has tried to keep events optimistic with her forecasts for 2021 being a 6% expansion in europe but many predictions are estimated for far less rosy numbers.
Bittersweet Predictions for German Unemployment Figures
Whilst the hospitality sector is looking to get back on its feet at present, not all industries have been in a position to so readily return to work. With many still unemployed, the German unemployment figures which are published on Wednesday may show further downturn in the rates. The previous record for the european powerhouse was 5.8% in April but is predicted by FX Street for 6.2% on Wednesday which would demonstrate a 3 year low in employment not seen since 2017. Regardless, events could be looking more positive for the Germans as car dealerships, bicycle shops and the recent reopening of the main football league, Bundesliga, should paint a healthier picture in the economic recovery.
As Germany has such a significant influence on financial output in the eurozone, the results on Wednesday could generate some volatility for the euro depending on which way the results fall.
Can the EU Countries Agree Solidarity to Help Themselves Out of the Pandemic?
Elisa Ferreira, the Commissioner for Cohesion and Reforms which has addressed the issues of the economic and social disparities within the EU for many years held a press conference last week. Topping the headlines was the statement that the key to the EU’s success of recovering from the pandemic is won or lost by “conversion, cohesion and reforms” for its neighbouring countries. In essence, the best outcome ensuring the minimum damage that the virus has caused can be mitigated by working together but this can only occur if the EU member states forget the financial differences between each other and progress as a team as opposed to 27 separate countries. France and Germany have already taken large steps to doing this by changing the emergency funds assisting struggling poorer countries to a grant as opposed to a loan which would have further increased the debt that they already have.
A long way is still to go though before a clear route and plans can be established and put into effect. As a result, there is still a lot of uncertainty as to how Europe will address its recovery which could be shown in its currency strength as we move through the remainder of 2020.
ECB Interest Rate Decision
Thursday will bring the ECB interest rate decision and accompanied speech by Christine Lagarde detailing the monetary policy stance and sentiment of what could be expected moving forwards. So far at least there has been no mention of moving the rates from the current 0% which will likely disappoint the markets but there may be some changes surrounding the bond buying scheme to provide some needing stimulus to the economy. One element that has been very positive for the EU is the €800bn funding package which has certainly been a driving factor allowing the euro to make significant gains against many major currency pairings. Could this just be short term or could the EU’s solidarity be its saving grace from the economic shortfall that many countries globally now face?
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