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Euro slumps as Eurozone falls into double-dip recession

currency-newsEuro slumps as Eurozone falls into double-dip recession
The euro fell sharply on Friday, with the EUR/USD exchange rate striking a new one-week low after the Eurozone's latest GDP figures confirmed the bloc slipped into another recession.
 
Meanwhile, trade in the pound is mixed this morning, with GBP/EUR flat at €1.1530 and GBP/USD retreating to $1.3857. GBP/CAD is rangebound at C$1.7059, while GBP/AUD and GBP/NZD hold steady at AU$1.7957 and NZ$1.9386, respectively.
 
Moving forward, a key focus this week will be the Bank of England’s (BoE) latest rate decision. Will an upwardly revised growth forecast help to bolster Sterling?
 

What’s been happening?

The euro closed last week’s session on the back foot after the Eurozone’s latest GDP figures reported that growth in the bloc contracted again in the first quarter of 2021.
 
While this slump was smaller than expected, it still confirmed that the Eurozone slipped into a double-dip recession over the winter, diminishing demand for the single currency.
 
The pound also came under pressure on Friday as GBP investors were left increasingly concerned by the scrutiny on Boris Johnson amid the ‘cash for curtains’ scandal.
 
However, Sterling sentiment rebounded at the start of this week’s session amidst UK economic optimism.
 
The US dollar, meanwhile, received a boost at the end of last week as the appeal of the safe-haven currency was bolstered by a cautious market mood as well as data showing a larger-than-expected jump in US consumer spending in March.
 
USD exchange rates then retreated on Monday as a fall in US Treasury yields offset a record rise in the ISM manufacturing PMI in April.
 

What’s coming up?

Looking ahead to the remainder of this week’s session, the most notable event will be the BoE’s latest rate decision.
 
While the BoE isn’t expected to make any changes to its monetary policy this month, the bank could still provide a boost to Sterling as the consumer spending boom which has followed the reopening of a large part of the UK economy is likely to result in the BoE upgrading its annual growth forecasts this week.
 
For EUR investors, Germany’s latest industrial data will be the primary focus, with the euro potentially attracting some support if factory output continued to improve in March.
 
In the meantime, the publication of the latest ISM non-manufacturing PMI could provide a boost to the US dollar, assuming that the US service sector continued to expand at a solid pace last month.
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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