The euro forecast has been very sedentary over the last month with euro to pound mid-market exchange rates typically only moving between the 0.9 and 0.92 ranges. It confirms what we had been experiencing since the pandemic came into fruition back in February where some currencies could see very disruptive data releases have little to no effect on the markets. A good example of this is the Eurozone’s recently revised GDP figures for 2020 contracting an additional 1% as they were re-estimated to fall from -7.7% to -8.7% according to FX Street. In comparison, UK’s GDP in April came in at a stunning 20% contraction but with May’s figure at 1% growth which follows KPMG’s predictions that the UK is predicted to contract by -7.2% and rebound to 2.8% next year. Despite these potentially highly volatile announcements we have seen very little in the way of currency movement. It now seems like a sign of the times where financial predictions account for very little and it is only the live result that the markets seem to care about.
From a USD standpoint, whilst clients buying Euros with Pounds could only benefit from a 2-cent gain at most, the EUR to USD rates have shown even less movement with just a 1.5-cent gap between the 1.117 low and the 1.133 high from the last 30 days.
ECB: Bond-buying to be Focused on Green Energy
The European Central Bank president Christine Lagarde, has recently announced that a large proportion of the bond purchasing scheme currently implemented to keep the Bloc’s economy afloat will now focus on investing in renewable energy sources in an attempt to tackle climate change. We had already seen the positivity from the heavily reduced emissions from closed factories and fewer vehicle emissions which will now be bolstered by a €1.35tn investment program to be topped up by the existing €20bn monthly bond-buying programs.
Plans have also been put in place to team up with UK Finance Minister Rishi Sunak as he unveils his green investment plans in his summer statement. There had already been worldwide calls to return to work, and society in general, in a more sustainable fashion and could create some positive sentiment for the single-currency should Lagarde’s green scheme be successful in helping reduce carbon emissions.
How Will Increasingly Positive Future Economic Sentiment Affect the Euro Forecast?
Despite the fears of a potential for a second wave of COVID-19 as had been seen regionally in a lot of countries globally, the general mood surrounding current affairs appears to become more positive with a risk-on attitude to the markets beginning to return following the vast uncertainty that the pandemic created.
With governmental calls to return to work, France has recently announced that after weeks of negotiations, health care workers will now collectively receive an €8bn investment for pay rises in what has been described as a “historic moment for our health system” by the new French prime minister Jean Castex. For most workers this means a base salary increase of €183 monthly and will be very welcomed to a sector that has had to work tirelessly to withstand the aftermath of the outbreak.
Economic Data Could Drive Euro Rates This Week
The Euro looks to have a busy week from its economic statements as today will bring the Harmonized Consumer Price Index and the ECB lending survey which will provide a better understanding of the current economic systems stability. Thursday will receive the ECB interest rate decision to see whether the possibility of reduced inflation may have an effect on whether to change the rate away from the current 0%. To finish the week off, Friday will see an EU leaders summit held to discuss Greece’s ongoing debt crisis. This could carry some weight from a currency perspective as the Greek economy, which was already struggling before the Coronavirus hit the member state, is facing dire circumstances now that unemployment is on the rise.
As there are data releases periodically throughout the week it could be more turbulent than previous weeks for the Euro. Additionally, just looking at FX Street’s economic calendar, it is clear to notice that there is a significant amount of data releases for a variety of countries including Australia, Canada and Japan. As a result, clients looking to buy or sell Euros into commodity currencies such as the Canadian and the Australian dollar may find that the exchange rates could be shifting around more than usual so it may be worth checking in with your account manager here at Foreign Currency Direct to receive some insight into your current trading positions.