The pound has struggled to make gains against the euro over the past month as the UK economy continues to struggle amidst Brexit uncertainty. Danske bank has predicted GBPEUR levels of 1.11 over the next 1 – 3 months while trade negotiations continue. Danske bank have also commented that should the UK and its European partners reach a trade agreement we could see exchange rates rise to 1.16 over the next 6-12 months.
Yesterday Prime Minister Boris Johnson announced further easing of lockdown restrictions to enable family and friends to mix again and to help get businesses back on their feet. From July 4th pubs, restaurants and hairdressers will be able to reopen their doors if they keep to social distancing rules. The social distance will be changed to 1 meter rather than 2 meters where it is not possible to stay apart.
Boris Johnson said we need to be careful not to increase the risk of transmission and therefore places with close proximity such as night clubs, gyms and swimming pools will remain closed until further notice. The easing of restrictions applies to England only and Scotland and Wales are yet to follow suit.
The euro has had a strong performance lately and the latest economic data released yesterday has only helped to keep the euro trending higher. Yesterday the Eurozone PMI data only cemented the opinions that the eurozone economy could bounce back faster than expected. German and Eurozone PMI data beat market expectations with Frances figures being particularly impressive with both the services and manufacturing sectors showing signs of growth.
Stocks in the eurozone rose last Friday as the European leaders set out delicate negotiations about the blocs proposed €750 billion Covid-19 recovery plan. The fund will be made up of grants and low interest loans, however it must be agreed by all 27 member states. Some countries have already shown resistance asking for assurances as to how the money will be repaid however Economists believe an agreement could be made as early as this week.
The USD opened this week on the back foot as market sentiment picked up as lock down easing measures across the globe were put in place. Further dragging on the USD were this weeks housing data figures which showed existing home sales fell sharper than expected.
We could see the USD come under more pressure this week as initial jobless claims are released tomorrow along with GDP figures for Q1.
There has been a wide range of indicators suggesting economic activity has picked up recently, but economists are loathed to read too much into the rebound. There is still a sense that the economy could struggle later in the year and still there are fears of a second wave.
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