- UK PM Boris Johnson touts ‘New Deal’ recovery plan
- Q1 UK GDP sees biggest decline since 1979
- EU extends travel ban on United States
- Pound-euro exchange rate +0.12% this week
GBP/EUR was higher by 74 pips (+0.67%) at 1.1010 as of 3pm GMT.
The currency pair held onto yesterday’s low near 1.09 and rallied back over 1.10 in afternoon trading. Yesterday it had fallen -0.50%.
GBP: Johnson Promises new Deal
While UK investors were clamouring for the safety of government debt and pushing bond yields lower in the process, the pound was firming against the euro. FX markets had a more risk on tone with a mostly weaker US dollar, which helped Sterling.
The British Prime Minister gave a speech on Tuesday promising £5 billion in spending in a “new deal” – like the name giver to American President FDRs regime in the 1930s – to build homes and more infrastructure. There is no extra spending beyond previous pledges but the message is clear that the UK will not return to austerity as a response to the pandemic.
On Tuesday, the final estimate for first quarter GDP dropped below previous estimates to -2.2% – that’s the biggest decline in over 40 years. The pound has mostly already discounted huge growth declines in Q1 and Q2. The big question moving forward is about the extent of the rebound in Q3.
Eur: Europe extends US travel ban
The European released its recommended list of ‘coronavirus-friendly’ nations for safe travel on Tuesday. The list includes Japan, Canada, South Korea, Australia and New Zealand.
A lot of the focus was on one key omission – the United States. Given the rising infection rate in many US States, and the fact that travellers from Europe are not allowed into the United States meant the US was not even on the short-list.
After improvement in national CPI numbers- the Eurozone-wide CPI rose to +0.3% year-over-year in June, up from 0.1% in May- and avoiding a trip into deflation (below 0%).