The key 1.15 level for GBP/EUR was once again tested yesterday, with the pair attempting but failing to hold above this level late in the trading day. This morning the pair has rallied 0.25% towards the 1.15 mark again and as the European market opens we could see a push above. EUR/USD also fell to a one week low.
Yesterday, German courts ruled and challenged their participation in the ECB’s quantitative easing programme, which has been a highlight of the ECB programme since 2015 in what was set out to be a huge €2.7 trillion plan. The European Union’s largest economy set out a three-month transition period for “necessary coordination” where the German central bank, the Bundesbank, could walk away from the scheme altogether. As well as stopping their involvement, Bundesbank could be forced to sell off the government bonds which they have already purchased, leading to a huge knock-on effect for borrowing costs within Europe.
This is another damming hit on the Eurozone considering the recent Coronabond issues. Countries such as Spain and Italy are being pitted against Germany and the Netherlands for support with the Covid-19 outbreak, where it has turned into ‘every man for himself’.
Tomorrow we have the Bank of England meeting and, with a shortened working week due to the Early May Bank Holiday, it could be beneficial to speak with your account manager to set an order and to potentially take advantage of any sharp rate movements we could see.
Have a good day,
Author: Jack Nicholls, Relationship Manager
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