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Weekly Update: Euro Storms to 18-Month High as EU Reaches Accord on Recovery Fund, Market Optimism Batters the US Dollar

The Euro was the leading performer this week, with the single currency soaring higher as EU leaders reached an agreement on the EU’s coronavirus recovery fund.

At the same time, optimism over the fund and hopes for a coronavirus vaccine sent the US Dollar tumbling.

 

Pound Sterling Undermined by Brexit Jitters

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

GBP/USD – Up two cents on the week’s opening levels

The Pound initially surged this week as the increasingly risk sensitive currency was bolstered by hopes of a coronavirus vaccine.

However, the Pound failed to sustain these gains, quickly falling back through the latter half of the week amidst renewed Brexit uncertainty.

In the absence of any notable UK economic releases next week it is likely we could see Sterling struggle for direction especially if Brexit talks remain deadlocked.

 

Euro Skyrockets as EU Agrees on Coronavirus Fund

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

EUR/USD – Up two cents on the week’s opening levels

The Euro skyrocketed over the past week, soaring to an 18-month high after EU leaders finally passed a deal on the $750bn coronavirus recovery fund.

Further buoying the Euro were the Eurozone’s latest PMI figures, with a strong reading in July bolstering hopes for the bloc’s growth prospects in the third quarter.

Turning to next week, the main focus for EUR investors looks to be the Eurozone’s latest GDP figures, which will reveal the depth of recession the bloc fell into during the second quarter.

 

US Dollar Tumbles on Market Optimism

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

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

The US Dollar struggled for most of this week’s session as coronavirus vaccine hopes and optimism surrounding the EU’s recovery fund saw investors shun the safe-haven ‘Greenback’.

However, the US Dollar was able to temper these losses through the latter half of the week amidst renewed tensions between the US and China.

Coming up this week, it is likely to be a busy session for USD investors, with the latest Federal Reserve rate decision and Q2 GDP figures acting as key catalysts in the US Dollar.

 

Australian Dollar Strengthened by Strong Risk Appetite

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

AUD/USD – Up one cent on the week’s opening levels

The Australian Dollar enjoyed some notable support over the past week as a risk-on tone in markets reflected favourably on AUD exchange rates.

This upside in the ‘Aussie’ was further supported by comments from Reserve Bank of Australia Governor Philip Lowe, who dismissed suggestions the Australian Dollar has got too strong, too quickly.

Looking ahead, the publication of Australia’s consumer price index will be in the spotlight next week, with a sharp slump in domestic inflation during the second quarter likely to drag on AUD exchange rates.

 

Key Data

Jul 27 EUR German Business Climate (Jul)

Jul 27 USD Durable Goods Orders (Jun)

Jul 28 GBP CBI Distributive Trades (Jul)

Jul 29 AUD Inflation Rate (Q2)

Jul 29 USD Fed Rate Decision

Jul 30 EUR German GDP (Q2)

Jul 30 EUR Unemployment Rate (Jun)

Jul 30 EUR German Inflation Rate (Jul)

Jul 30 USD Initial Jobless Claims (25/Jul)

Jul 30 USD GDP (Q2)

Jul 31 EUR GDP (Q2)

Jul 31 EUR Inflation Rate (Jul)

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