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Weekly Update: Pound Bolstered by New Stimulus Package, Euro Struggles as EC Slashes Eurozone Growth Forecast

The Pound climbed to a three-week high this week, with investors turning bullish towards Sterling in light of the UK’s new stimulus package.

The Euro, meanwhile, struggled to find support this week after the European Commission slashed its 2020 growth forecast for the Eurozone.

 

Pound Sterling Rallies to Three-Week High

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

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

The Pound struck higher this week, finding support in response to Rishi Sunak’s mini budget in which the Chancellor announced a new stimulus package aimed at protecting jobs.

However, Sterling’s gains were trimmed in the latter half of the week, as the last round of Brexit talks concluded with the EU’s chief negotiator Michel Barnier warning Brexit will inevitably lead to barriers between the UK and EU.

Coming up, next week there will be a slew of UK economic releases for GBP investors to look out for, the most influential of which is likely to be May’s GDP figures.

 

Euro Undermined by Gloomy Forecasts

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

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

The Euro received support from plenty of upbeat data this week, but the single currency struggled to consolidate these gains in light of some gloomy economic forecasts.

The European Commission slashed its Eurozone growth forecasts from –7.7% to –8.7% for 2020, whilst also warning there are ‘exceptionally high’ downside risks which could result in an even worse recession than currently predicted.

Turning to next week, the spotlight for EUR investors looks to be on a key EU summit in which EU leaders will attempt to reach an agreement regarding the €750bn coronavirus recovery fund.

 

US Dollar Fluctuates in Mixed Trade

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

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

The US Dollar traded in a wide range over the past week, in response to fluctuating market sentiment.

Upbeat trade resulted in broad USD selling through much of the session but saw the ‘Greenback’ roar back to life by the end of the week as coronavirus concerns began to erase market optimism.

Looking ahead to next week, will we see rising coronavirus cases around the world drive investors back toward the safe-haven US dollar in greater numbers?

 

Australian Dollar Rocked as Melbourne Put Back into Lockdown

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

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

The Australian Dollar was met by some notable volatility over the past week as the news that Melbourne would be going back into lockdown after a spike in coronavirus cases spooked investors.

Also contributing to the volatility in AUD exchange rates was fluctuating market sentiment, as well as the cautious tone struck by the Reserve Bank of Australia’s (RBA) following its latest policy meeting.

In the week ahead, the focus for AUD investors looks to be on Australia’s latest jobs report, with the ‘Aussie’ likely to face some pressure if unemployment continued to rise last month.

 

Key Data

Jul 14 GBP GDP (May)

Jul 14 EUR ZEW Economic Sentiment Index (Jul)

Jul 14 USD Inflation Rate (Jun)

Jul 15 GBP Inflation Rate (Jun)

Jul 16 AUD Unemployment Rate (Jun)

Jul 16 GBP Unemployment Rate (May)

Jul 16 EUR ECB Rate Decision

Jul 16 USD Retail Sales (Jun)

Jul 17 EUR EU Summit of Leaders

 

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