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Weekly roundup: Euro struggles on coronavirus resurgence

currency-newsWeekly roundup: Euro struggles on coronavirus resurgence
The euro was offered some support after the latest German GDP data revealed the country’s recession was not as deep as previously forecast. However, the quarter-on-quarter contraction of -9.7% and annual slump of -11.3% was the worst fall on record and considerably larger than the contraction seen during the financial crisis.

The euro was under pressure for much of last week as coronavirus cases increased across Europe, triggering fears that lockdowns may be reintroduced.

However, EUR made some gains this week after the latest German business climate index rose and showed the bloc’s largest economy was on track for a recovery after the coronavirus crisis.

The data from Ifo showed business climate in the bloc’s largest economy jumped to a higher-than-forecast 92.6.

The euro was also boosted after Ifo economist, Klaus Wohlrabe, said they expected GDP to surge by around 7% during the third quarter. However, he warned the economic rebound is still fragile.

The single currency made further gains this week on signs of a developing coronavirus treatment, which boosted market sentiment and offset fears sparked by a resurgence in coronavirus cases in Germany, France and Spain.

Meanwhile, last week saw the latest round of post-Brexit trade talks between the European Union and UK end with both sides stating they made little progress, and blaming each other for the current stalemate as the end-of-year deadline draws closer.

Looking ahead, the euro could benefit from several hawkish speeches from European Central Bank (ECB) policymakers this week.

Added to this, the single currency could edge higher at the end of the week if the latest GfK consumer confidence data reveals sentiment improved more than expected in Germany in September.

However, these gains could be limited if confidence in the bloc fails to improve in August due to the resurgence of cases across the Eurozone this month.

Meanwhile, at the end of the month the currency could extend any gains following the release of the latest German flash inflation data which is expected to edge higher in August.
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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