Pound Slumps as ‘Freedom Day’ Overshadowed by Coronavirus Concerns, Euro Weakens as ECB to Leave Interest Rates at Record Lows for Longer

The Pound faced some significant headwinds at the start of this week as England’s ‘freedom day’ was undermined by a worrying jump in domestic coronavirus infections. 

At the same time, the Euro faltered in the wake of the European Central Bank’s (ECB) latest rate decision as the bank signalled that interest rates are likely to remain on hold for many years yet. 

Pound Fluctuates amidst Mixed Data Release 

GBP/EUR – Unchanged on the week’s opening levels 

GBP/USD – Down one cent on the week’s opening levels 

The Pound plummeted to a six-month low at the start of this week, as an alarming surge in domestic coronavirus cases overshadowed the lifting of all remaining restrictions in England.  

Sterling may have drifted into oversold territory however, with GBP exchange rates rebounding in mid-week trade, before faltering again at the end of the session on the back some disappointing PMI releases. 

Looking ahead, it’s likely that UK coronavirus concerns will continue to act as a key catalyst of movement for the Pound next week, with the currency likely to face additional headwinds if domestic cases continue to surge. 

Euro Undermined by Dovish ECB Comments 

EUR/GBP – Unchanged on the week’s opening levels 

EUR/USD – Down one cent on the week’s opening levels 

The Euro initially struggled to attract support at the start of this week, as the single currency’s strong negative correlation with the US Dollar saw it falter as the latter surged. 

The Euro then extended this downside after the European Central Bank (ECB) concluded its latest policy meeting, striking a slightly less dovish tone than expected, but still signalling that interest rates will remain at record lows for some time to come. 

The publication of the Eurozone’s latest GDP figures will no doubt be the primary focus for EUR investors next week. Will a strong rebound in growth in the second quarter lend some support to the Euro? 

US Dollar Finds Fleeting Gains amidst Fluctuating Risk Appetite 

USD/GBP – Unchanged on the week’s opening levels  

USD/EUR – Unchanged on the week’s opening levels  

The US Dollar rallied through the first half of this week, with USD exchange rates soaring to new multi-month highs as investors flocked to the safe-haven currency amidst a sharp deterioration in market sentiment.  

However, the ‘Greenback’ was unable to sustain these gains for long as the second half of the session brought with it a notable rebound in risk appetite. 

It looks to be a busy session for USD investors next week with the Federal Reserve set to deliver its latest rate decision and the publication of the latest US GDP figures, with the former potentially stoking some notable volatility in the US Dollar depending on the tone struck by the Fed. 

Australian Dollar Rocked by Fluctuating Risk Appetite 

AUD/GBP – Unchanged on the week’s opening levels 

AUD/USD – Unchanged on the week’s opening levels 

The Australian Dollar traded in a wide range over the past week, with the risk-sensitive currency rising and falling in step with fluctuating market sentiment.  

Also influencing AUD exchange rates were domestic coronavirus developments, with the ‘Aussie’ being pressured by the news that 50% of Australia’s population is back in lockdown. 

Turning to next week’s session, the publication of Australia’s consumer price index will be in the spotlight for AUD investors. Will a sharp rebound in inflation in the second quarter reflect positively on the ‘Aussie’? 

Key Data  

Jul 26 EUR German IFO Business Climate (Jul)  

Jul 26 GBP BoE Vlieghe Speech 

Jul 27 GBP CBI Distributive Trades (Jul) 

Jul 27 USD Durable Goods Orders (Jun) 

Jul 28 AUD Inflation Rate (Q2) 

Jul 28 USD Fed Rate Decision  

Jul 29 AUD Business Confidence (Jul) 

Jul 29 USD GDP (Q2) 

Jul 30 EUR GDP (Q2) 

Jul 30 EUR Inflation Rate (Jul)