GBP/EUR: Euro Slips vs Pound As Trade Wars Hit Germany

German fiscal stimulus could support the regional risk assets and accelerate the capital flows to the European equity markets. The country’s Finance Minister Olaf Scholz announced the extension of the current unemployment benefits to 24 months from the current 12 months.

The policy actions by the German government aimed at uplifting the country from the impact of the coronavirus could help the German DAX 30 index to outperform its US counterparts in the coming months. Both administrations are seemingly pursuing starkly different approaches to contain the economic impact of the virus; at least on the political unity required against a common enemy.

The Republican and Democratic camps in the US Congress are a trillion dollars apart in reaching a consensus on their proposed fiscal stimulus, even when the data points suggest unemployment is at massive levels and workers require financial assistance.

On the job front, the job postings in the US declined by 36.4 Percent in the week ending August 14, the lowest level since early-May.

The job posting decline might indicate a high level of unemployment in August. It could spell more trouble for the economy as the earlier unemployment benefit scheme of 600 dollars a week had already expired.

In sharp contrast, Germany hardly had any moment of panic on the job front since the spread of the pandemic. It just had single digits unemployment, 4.2 Percent for June, and the July manufacturing PMI also expanded for the first time since December 2018: signs that the largest economy in Europe fared much better than the US during the lockdown.

Separately, the Copper price hit a new two-year high during the Asian session as the major producer Rio Tinto cut its outlook for the rest of 2020, triggering supply concerns on the metal. The dollar weakness also helped in pushing the price higher.

The pro-risk Australian dollar and Euro inched up higher while haven-linked Japanese Yen fell against its competitors. Gold showed a dip of 0.8 Percent while the US 10-year Treasury note was higher.

Euro-area and Canada inflation data will set the mood of the market today ahead of the August-14 week’s EIA crude oil inventory report is released.