High number of new Covid cases globally dampens news of progress on a European stimulus package

Europe seems to have an agreement on a roughly EUR750B stimulus package driving bulls to bet on a stronger euro. However, new Covid cases in many countries reminds investors that until a vaccine is widely available a protracted period of weak economic activity will likely remain. The British pound pushes above 1.26 again on hopes for a vaccine and successful Brexit negotiations scheduled to resume this week.

Wednesday: Existing Home Sales for June
Thursday: Weekly initial Jobless Claims and Continuing Claims.
Friday: Manufacturing and Services PMI for July. New Home Sales for June

  • FX Rates
    July 20, 2020

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.


  • USD

    The US dollar is flat in volatile trading as financial markets wrestle with the positive prospects of a European stimulus package and a possible vaccine. Resurgent Covid cases in pockets around the US and a potentially contentious election in November weigh on the optimism.

    GBP

    The pound is stronger on positive sentiment led by expected clinical trial results from AstraZeneca and Oxford University. The UK has a contract to purchase a vaccine if trials are successful. 

    Brexit talks resume this week and there remain key disagreements between the two sides, however, it seems financial markets today are optimistic an agreement can be made ready by the deadline date.

    EUR

    The euro touched a four-month high vs. the US dollar as European leaders appeared to have reached a compromise on a hard fought EUR750B rescue package which is intended to provide fiscal support to the bloc. The agreement allows for grants totaling EUR390B to be spent on “green” initiatives and the remaining funds to be provided in the form of low interest loans.

    German PPI data for June showed zero price increases reminding financial markets that the European economy remains weak.

    CAD

    The Canadian dollar gained slightly vs. the US dollar on positive sentiment surrounding the possible stimulus package in Europe. With oil demand in question the price of crude has topped out at $40 with traders awaiting good news on the fight against Covid before taking prices higher.

    ASIA/PACIFIC

    The Australian dollar has struggled to break above the 70 level. FX traders await a speech tomorrow by the head of the central bank, Philip Lowe.

    The Indian rupee strengthened to a 5-day high as foreign investors continued to pile into the Indian equity markets.

    The Japanese yen is flat having weakened initially on news of a stimulus package in Europe. However, the ever-present Covid cases in the US has muted any risk-on sentiment.

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Peter Compton
WRITTEN BY
Peter Compton

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