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Monthly wrap: Euro struggles as EC predicts deeper recession

currency-newsMonthly wrap: Euro struggles as EC predicts deeper recession
Key takeaways:

-              Euro fluctuates as EC predicts deeper Eurozone recession.

-              Coronavirus, Brexit negotiations and signs of a German rebound move the single currency.

-              EUR Monthly lows: £0.88, $1.11, AU$1.60, NZ$1.71, C$1.50

-              EUR Monthly highs: £0.91, $1.13, AU$1.65, NZ$1.76, C$1.54

The euro has been able to make slight gains over the last month, although Brexit worries and a coronavirus-led recession weighed on sentiment.

An upbeat European Central Bank (ECB) offered the single currency some support in early June as policymakers ramped up its Pandemic Emergency Purchase Programme (PEPP) to €1.35 trillion.

EUR suffered losses in the middle of June despite markets rebounding as risk appetite increased. The euro’s gains were limited as data showed the bloc’s construction output tumbled to an all-time low in April, and Brexit pessimism persisted while negotiations remained in deadlock.

EUR was also able to make gains, rising off two-and-a-half week lows against its main rival, the US dollar. This came despite EU leaders making no further progress on the huge stimulus plan that left the bloc divided.

Upbeat data from across the European Union, especially France, offered the single currency support at the end of June. France’s business activity returned to growth while German business confidence saw the best rebound on record.

However, the euro suffered a further blow after the European Commission said the bloc will shrink -8.7%, suffering a deeper recession than first thought.

This offset further optimistic data from Germany as the EC noted that some of the bloc’s other larger economies such as France, Italy, and Spain are struggling to recover.

Meanwhile, Brexit talks between Brussels and London also entered a crunch phase, which continue weighing on the single currency.

Looking ahead, EUR investors will be closely watching the latest European Central Bank (ECB) monetary policy meeting. Dovish comments from the bank focusing on the bloc’s economy suffering a worse recession than expected will dampen sentiment.

The slew of the latest flash PMIs from around the Eurozone will also be in focus for investors as they assess whether the easing of the coronavirus lockdowns has helped with growth in July.

The end of this month will also allow markets to get a better picture of the state of the Eurozone’s economy. If flash GDP slumps more than expected between April and June, it will leave the single currency weaker at the end of July.
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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