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Euro slumps as cracks begin to show in the EU

currency-newsEuro slumps as cracks begin to show in the EU

The euro dove again yesterday as EU members remain split over their fiscal response to the coronavirus crisis.

The pound is showing little movement this morning, with GBP/EUR flat at €1.1421 and GBP/USD muted at $1.2370. GBP/CAD is rangebound at C$1.7526, while GBP/AUD and GBP/NZD are holding steady at AU$2.0403 and NZ$2.0941 respectively.

Today all eyes will be on the US payrolls report.

What’s been happening?

The euro continued pushing lower on Thursday as markets grow increasingly concerned about the unity of the EU over its failure to deliver a cohesive response to the coronavirus outbreak.

EUR investors were mostly concerned by political infighting between members over the issuing of so-called ‘coronabonds’ as Germany and the Netherland are resistant to accept the risks posed by joint debt.

Thu Lan Nguyen, FX Strategist at Commerzbank, suggests:

‘We all know that the strength of a relationship can be severely tested during times of crisis. This is currently very obvious in the EU, and the euro is not taking it well. There is no agreement about how to support the member countries most badly affected by the virus.’

Meanwhile, the US dollar accelerated though yesterday’s session in spite of a gargantuan rise in US unemployment claims.

The US Department of Labor reported initial jobless claims jumped by a record 6.6 million last week, dwarfing the record of 3.2 million set the week prior as the coronavirus resulted in massive layoffs. 

At the same time, we saw the pound maintain its upward trajectory on Thursday, with the currency extending its rally into its sixth consecutive session.

What’s coming up?

Looking ahead, the US jobs market is in the spotlight again today with the publication of the latest US payroll report.

This could dampen the appeal of the US dollar if the highly influential releases confirms fears of a sharp contraction in employment growth last month.

In Europe we are likely to see the euro continue trending lower as long as EU leaders are at loggerheads over how to tackle the financial damaged caused by the coronavirus.

Finally, we may see the pound face some headwinds this morning with the publication of the UK’s latest services PMI, with March’s finalised figures likely to be revised lower as they also take into account the period since the countrywide lockdown.

Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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