The British pound is up against the euro on Friday
- Sterling closes the week higher vs. euro
- Michel offers concessions on EU Budget / Recovery Fund
- Remdesivir reduces risk of COVID death by 62% – study
- Moody’s predicts UK Debt:GDP to rise by 24%
GBP/EUR was higher by 34 pips (-0.28%) at 1.1975 as of 3pm GMT. This week it was higher by 0.71%.
Having rebounded off 1.115 in the early afternoon, the currency pair eeked out another gain to make a 3-week high near the 1.12 big figure. Yesterday it was up +0.08%.
GBP: Moody’s predicts big UK debt rise
A more constructive tone across markets, including a weaker US dollar supported the British pound. The source of some of the optimism was the news that Gilead drug Remdesivir reduces the risk of death in COVID-19 patients by 62% according to a study. Gilead said new studies are still needed but investors are interpreting the news as solid progress.
The gains in Sterling came despite a tough message on the future UK debt burden from rating’s agency Moody’s, who said that after the latest £30 billion stimulus announced by Rishi Sunak this week, UK debt as a proportion of GDP will rise by 24% versus 2019 levels.
EUR: Michel offers compromise before Summit next week
A big source of volatility in the euro currency is speculation over whether the EU can reach agreement on joint debt issuance via a so-called ‘Recovery fund’.
European Council President Charles Michel offered some concessions to the more fiscally countries by proposing a smaller long term budget than previously thought given the addition of the 750 billion recovery fund. The long term budget would be 1.074 trillion while the recovery fund would stay at the 750 billion suggested by the EU Commission.
Most of the recovery funds would go to debt-burdened countries like Greece and Italy but also towards combating climate change. Michel referred to the funds only being available on the condition of ‘following the law’. Not long afterwards, Hungarian President Victor Orban said he would veto the new plan if funds for his country came with strings attached.
There is an EU summit scheduled for Friday July 17 to discuss the EU Recovery Fund.