Will the Euro Strengthen Against the Pound in the Short Term?

EURGBP Sees 0.8700 Hopes Fade After Data

The Euro has been trading in a fairly tight range during the course of this week vs the Pound. The Euro initially weakened owing to the problems with the EU Coronavirus Recovery Fund but it has regained a cent vs the Pound since the agreement finally came between the member countries.

However, what is does highlight is that there is still a big problem between the nations involved as it took so long for them to agree the deal, which highlights there is a difference of opinion as to how to handle the cost of the pandemic.

Indeed, this meeting was the longest single meeting held in twenty years which demonstrates firstly how important the issue is in terms of the economy but also how much of a difference exists between the member states.

According to some reports the impact of the virus could cause some economies to contract by over 10% including France, Italy and Spain. This is likely to result in problems for unemployment in these nations and so the fund is extremely important as to how it will be distributed.

The agreement does still need to be ratified by the European Parliament but at least it is a step in the right direction. However, the next stumbling block will be as to how the fund is distributed. The amount of money made available is as much as EUR750bn with EUR390 in grants and EUR360bn in loans.

We end the week with the latest economic news for the Eurozone in terms of the latest manufacturing and services data covering July. As the Eurozone had emerged from their lockdown prior to this date then this could make interesting reading as it will provide evidence as to the speed and strength of the recovery from the lockdown.

Estimates are for 52 and 51.5 respectively and anything above 50 represents growth. Therefore, if the data comes out better than expected this could see Euro strength vs the Pound as we end the week.

Will the Pound be Able to Recover Against the Euro?

As we turn the focus towards the UK the Pound remains under pressure vs the Euro. Recent economic data for the UK has shown some signs of recovery but what does remain of concern is the jobs market. Between March and June UK payrolls showed 649,000 less jobs during this period and this also includes those currently on the furlough scheme. According to a report by the Chambers of Commerce almost 30% of businesses in the UK are likely to cut jobs during the next quarter which is likely to send unemployment upwards very quickly. GDP figures in the UK published at the height of the pandemic saw the figure drop to -20% but the recovery so far has been relatively quick as businesses are moving back to a more ‘normal’ situation.

Later today Jonathan Haskel from the Bank of England will be making a speech at 11am. This could provide hints as to what the central bank are thinking in terms of their impact on the economy and any future changes that may need to happen in order to support the economy and combat the problems caused by the pandemic and the subsequent lockdown.

We end the week with the latest release of UK Retail Sales for June. These are likely to show an improvement compared to the previous month as the UK emerged from it lockdown status. Expectations are for an improvement of 8% compared to the previous month but anything different could cause movement for Pound Euro exchange rates so make sure you pay close attention to tomorrow morning’s economic data releases both in the UK and in Europe.

If you have a currency transfer to make and would like a free quote when buying or selling Euros then contact me directly and I look forward to hearing from you.