A Franco-German proposal for a 500 billion euro EU rescue fund has done little for the euro versus Sterling since it was announced late yesterday.
A record rise in UK jobless in April claims didn’t dampen demand for Sterling, which has been recouping some of Friday’s large decline.
Pound to Euro was higher by 32 pips (+0.29%) to 1.1204 as of 3pm GMT.
GBP/EUR has found a temporary base at 1.116 this week after steep declines on Friday when the exchange rate lost over 1%. This week so far it is little changed.
GBP: UK jobless claims most on record
The official UK unemployment rate is too dated to include the major impact from the lockdown but the more up-to-date jobless claims data for April show what’s to come. More Brits filed for jobless benefits in April than any single month on record by a wide margin.
UK Jobless claims surged by 856,000 in April versus a revised 5000 in March.
EUR: 500 billion EU recovery fund
A potentially huge new development in Europe’s fight against the economic damage done by the pandemic happened yesterday. German Chancellor Angela Merkel and French President Emmanuel Macron have made a proposal for a 500 billion euro ‘rescue fund’ for the European Union.
However, so far there has been limited positive reaction in the euro versus the pound, in part because the deal still needs to be agreed by all 27 member states. For all European countries to be satisfied with the arrangements, French finance minister Le Maire predicted it might take until next year.
The general concept is that the funds would be raised by the European Commission, which would borrow on capital markets and then disburse the funds to the nation states as needed as grants instead of loans. The EU bonds would then be paid back via the EU budget rather than directly by the nations who used the funds. Each nation state would contribute in the same manner that they contribute to the EU budget, for example Germany would contribute 27%.