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Euro stumbles as European Commission slashes Eurozone growth forecast

currency-newsEuro stumbles as European Commission slashes Eurozone growth forecast
The euro fell sharply yesterday in response to forecasts the Eurozone economy is set to shrink up to 8.7% in 2020.

Meanwhile, the pound is rangebound so far this morning, with GBP/EUR stable at €1.1123 and GBP/USD flat at $1.2546. GBP/CAD is muted at C$1.7074, while GBP/AUD and GBP/NZD hold steady at AU$1.8089 and NZ$1.9177 respectively.

Coming up, the spotlight today will be on the UK’s summer supplementary budget. Will the UK’s new stimulus measures be enough to impress investors?

What’s been happening?

The euro fell back on Tuesday as the single currency was undermined by the European Commission's latest economic forecasts.

These saw the EC slash its predictions for Eurozone growth from –7.7% to –8.7% in 2020, while also warning of ‘exceptionally high’ downside risks that the recession could be even worse than currently feared.

At the same time, the US dollar was mostly rangebound through yesterday’s trading session as fading market optimism allowed the safe-haven ‘Greenback’ to claw back some initial losses.

The pound, meanwhile, made some modest gains on Tuesday, although these were capped as GBP investors braced for today’s summer statement from the UK Treasury.

What’s coming up?

Turning to today’s session, the focus will undoubtedly be on the publication of Rishi Sunak’s ‘summer update’.

The Chancellor is expected to use today’s update to detail the current state of the UK economy as well as outline new stimulus measures to help aid the country’s post-coronavirus recovery.

Of what we know so far, Sunak will announce plans for a £3bn green homes grant to help cut emissions as well as create jobs.

But the Chancellor will need to go much further if he is to impress GBP investors, with the pound poised to relinquish some of its recent gains if today’s announcement proves to be underwhelming.

Across the Channel, EUR investors will look to the European Central Bank’s (ECB) Luis de Guindos for fresh impetus, with the ECB’s Vice-President potentially offering more insight into the bank’s policy plans in a speech later today.

Finally, in the absence of any US economic data, any movement in the US dollar is likely to come courtesy of market sentiment. Expect to see USD exchange rates strengthen if coronavirus fears continue to buffet optimism.
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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