Friday proved to be somewhat of a quiet day, the headline being the Eurozone’s record GDP quarterly contraction. Coming in at 12.1%, the reading was only slightly worse than the ECB’s severe scenario and should not come as a surprise, given the lockdown measures that were in place across Europe.
July showed to be an impressive month for sterling. Cable, for example, closed July with over 5.5% gains, the highest monthly improvement in a decade.
However, August brings with it a plethora of potential stumbling blocks. On the COVID-19 front, numerous media outlets detailed how another lockdown could be viable given the recent spike in infections. If that does come to fruition there is no doubt the economy will suffer and the pound likely lose any gains it has been able to make since the ‘lift’ of restrictions.
As for Brexit, with talks unconstructive thus far, the seventh round of negotiations will restart on the 17th August. Much to the pound’s destress, neither the UK nor Brussels show a willingness to come closer to a deal, with key issues still posing as unagreeable problems. If there is any ‘negative’ news that leaks, history proves that this will substantially hinder GBP’s performance.
GBPUSD opened the trading day on Friday at 1.3140, before dipping off slightly towards the end of the day, closing at 1.3128.
GBPEUR opened Friday at 1.1048, only to gain some ground against its European counterpart, finishing above the 1.11 mark at 1.1108.
After an impressive July for EURUSD, the pair opened the last day of the month at 1.1895, depreciating over the day, and finally closing at 1.1818.
EURUSD was probably the most watched pair last month, with records being broken on almost a weekly basis. After reaching 2-year highs above 1.19, EURUSD has pulled back and looks to start the trading week in the mid 1.17’s.
Looking ahead, Europe’s handling of the virus will prove to dictate price action. Sadly for Europe, cases are rising, particularly in the ‘larger’ economic territories; notably Spain, Italy, France and Germany. If there is any indication to increase lockdown efforts thus stunting any recovery made, the common currency is likely to come under significant pressure and lose all the recent gains made.