GBP/EUR: Pound Higher vs. Euro Amid No Deal Brexit Plans

The British pound is higher against the euro on Thursday.

  • EU / US trade tensions weigh on the euro
  • WHO: Europe has first weekly rise in coronavirus cases
  • ECB introduces new euro repo facility
  • Pound-euro exchange rate +0.04% this week

GBP/EUR was up by 27 pips (+0.24%) to 1.1061 as of 3pm GMT.

The currency pair was flat through Asia but popped above 1.11 in early European trading hours before dipping back towards 1.105 as US markets opened. Yesterday it fell -0.30%

GBP: Too early to tell in the UK

It’s too early to judge the effect of the UK reopening, which only really started this week. That meant the rising cases in mainland Europe were the bigger source of concern for FX traders.

World Health Organisation (WHO) European Regional Director Hans Henri Kluge said on Thursday that 11 European countries face a resurgence of the coronavirus, with cases accelerating in 30 countries. He noted that most European countries are still in the first wave. He made reference to preparing for the autumn when the coronavirus will be joined by the flu.

EUR: Rising virus cases dampen optimism

The euro is on course for a second day of declines as the main counterpoint to the US dollar, which has rebounded amid market uncertainty over rising coronavirus cases and EU / US trade tensions.

The ECB on Thursday introduce a new Eurosystem repurchase (repo) facility for central banks outside of the euro-system. It will allow other central banks to access euro liquidity under crisis conditions by borrowing against euro-denominated debt – rather than selling other currencies in the open market to get euros.

The ECB also released the accounts of its last meeting when the central bank added significantly to its PEPP bond buying program. Discussing the PEPP, the ECB’s Mersch said it would not need to make full use of it if market tension had eased sufficiently. Although they won’t admit it, the ECB is now being boxed in because of the German court decision that said the ECb needs to show the measures it has taken are ‘proportional’.

 


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