The EURGBP rate has given up almost two cents recently as the bloc’s economies struggle with the upward battle against the pandemic. Despite the World Bank believing that the UK economy would shrink by 10% this year, July’s economic activity had seen 6.6% growth whilst the European Commission had forecast that the Eurozone’s 27 member states would expect an 8.3% drop for 2020. So far, it appears that Europe has fared worse off that their island counterparts as their GDP figures were only expected to bounce back next year. Mid-market rates currently reside at 0.911 having dipped from the 0.929 levels we saw last week.
The euro to US dollar exchange rate has shown different results but has still seen a slight blip in euro weakness. The EURUSD has dropped by nearly a cent since yesterday’s highs of 1.188 to today which is now trading just below 1.18 but has already seen a day-low of 1.174 which is a 5-week low for the currency pairing.
ECB State of Union Speech
The news comes after the ECB President Ursula Von der Leyen held the first State of the Union speech outlining the bloc’s commitments moving forwards into next year which included plans within the subjects of climate change, Coronavirus, Brexit, technology and migration. 50% of the €750bn emergency funding package created by all the member states to combat the economic fallout has been allocated to new climate change policies and improvements to the tech sector with €8bn being proportioned for supercomputer investments.
The key topics of Brexit and the pandemic were more centred around solidarity within the Eurozone than it was outlining further plans going forwards. Von der Leyen continued to repeat the Brexit rhetoric that has been regularly announced over the past 4 years of negotiations by stating that without any progress being made recently as well as little positivity into the foreseeable future. Suggesting that the UK/EU trade deal looks seemingly unlikely considering how close to the deadline the pair are to getting before needing an agreement in place.
Even despite the controversial Internal Market Bill created by the UK to potentially be given the power to amend the Withdrawal Agreement and the threat to affect the likelihood of the UK-US trade deal as mentioned by Joe Biden recently, the EURGBP is still conceding points. It could be considered that the uncertainty that this event has created has not been full taken into account by the markets. Reason being is that if the UK would make U-turns against previously agreed deals, it damages the UK’s reputation of being an honest and reliable country and make give cause for concern for the American’s who are looking at an upcoming deal with the UK. With all things being considered, there is certainly reason to believe that the euro to pound exchange rate could not stay moving in this direction for long if bold statements like this are being made.
No Market Data This Week
With no significant market data coming out this week, the euro will not see any support if it were to continue giving up inroads against its major currency counterparts. Next week will not be much better either with only the Markit Manufacturing Index being released on Tuesday. The German release is expected to come in the same as the Eurozone overall, at a slightly positive 52 reading. It seems that ongoing volatility would be based off of Brexit negotiations and the pandemic. However, considering that countries like France have seen daily COVID-19 cases above 10k, it seems unlikely that any euro strength will come from this aspect.
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