The euro continues its upward battle against the pound at present as the EURGBP currency pairing has been trading below 0.89 levels for the past few days. This had been a key resistance level for the pairing over the past few months but is beginning to see Sterling pick up the gains against the single currency. Some of the currency movement could be based off of some of the 27 member states of the EU, which were struggling financially even before 2020 came around, are now really being put under the hammer as the pandemic continues to grip many economies globally with ensuing recessions still very much underway. Initial considerations that the euro had responded with firm resilience against many of its major currency counterparts is starting to disintegrate as the pound, which has not been a particularly favourable currency during this pandemic, is starting to shape up as a safer bet than the euro especially considering that GBPUSD exchange rates have shot up to a 2-year high at 1.33.
Blow to EU tourism: Portugal Could See UK Holidaymakers Take Quarantine Upon Return
The Eurozone is not being supported by the tourism industry as many countries, including the UK, have applied 14-day quarantine restrictions to many of the countries who are dependent on British holidaymakers to keep revenue high in the hospitality sector. Therefore, bars, restaurants and hotels will be put under further duress as we move closer to the end of the year. It could also be a turning point for lifting sanctions too as the announcement that Portugal, which has the UK-sided isolation period lifted upon returning from the country recently, is now being re-considered to have its restrictions re-imposed and will further hamper the tourism sectors recovery.
Spain, which is also currently under the UK’s quarantine restrictions, has seen 96,000 new infections over the past 2 weeks which has been increasing towards the latter end of the timeframe as last weekend saw an additional 23.5k cases to bump up the recordings. This firmly places it as one of the global hotspots for COVID-19 at the moment and may urge the government to undertake curfews and other measures just like what was undertaken in Australia, when the state of Victoria had another spike of Coronavirus. With uncertainty in many countries within Europe, it cannot be favourable for the euro’s strength and could continue to weaken against both the pound and the US dollar as we move into next week.
EURUSD Hits 2-year High on Monday
Where the euro to US dollar exchange rate is concerned, the pairing which hit a 2-year high last Monday, has now dropped off by a cent and the currency pairing continues its highly volatile undulations that it has been experiencing for the past few weeks. It may be worth noting that it appears that this currency movement has occurred based more off of US dollar weakness than it has been from gains from the euro’s side considering the improvements that the pound to US dollar has made recently.
It may not appear that the EUR/USD rates will be bolstered by economic data at any point soon either taking into account the upcoming 7 days in the markets. Eurozone Consumer Price Index for Tuesday dropped from last month’s 1.2% to 0.4% whilst German retail sales came in marginally better than expected at 4.2% from an anticipated 3% but still falling considerably from the previous 6.7% recording. This is surprising considering that the Bloc’s retail sales figures which come in shortly later today is expected to increase to 3.5% from July’s 1.3% figure.
Eurozone Sees GDP for Q2 Plunge to a 12% Contraction
Next week could come with some more important announcements though as Tuesday will see the revised GDP Q2 for the group which could see numbers move away from the currently proposed 12.1% contraction. This will then be followed by the Interest rate decision on Thursday but is not anticipated to be moved from its current levels and thus, may not create any currency movement for the euro.
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