Forex – Euro Strengthens as ECB Generates Optimism

© Reuters.

By Peter Nurse – The euro has posted strong gains in early European trade Friday, as the European Central Bank’s decision to expand its stimulus measures has boosted optimism of a global economic recovery.

At 3:40 AM ET (0740 GMT), traded at 1.1357, up 0.2%, just off its strongest level in almost three months, and with its March 9 peak of $1.1495 now in sight. On the week, the single currency has risen 2.4% and is set to clinch a third straight week of gains.

These gains follow the ECB’s move Thursday to increase its emergency bond purchase scheme by 600 billion euros, more than the 500 billion expected by markets, to 1.35 trillion euros and extend the scheme to mid-2021.

These “easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the Euro area survive the corona crisis in one piece,” said analysts at Nordea in a research note.

It also adds to the string of positive surprises that have recently come out of Europe, including the EU’s recovery fund and another German stimulus package.

By contrast, the , which tracks the greenback against a basket of six other currencies, is down 0.1% at 96.517, at levels not seen in nearly three months, and on course for its third consecutive week of losses. The earlier broke through 70c for the first time this year, while the is also now trading at pre-pandemic levels.

This follows broad optimism that global economies will recover as social distancing restrictions are eased, resulting in investors deserting the safe haven.

The U.S. weekly report on Thursday showed the number of Americans filing for benefits dropped below 2 million last week for the first time since mid-March, although the figure actually rose.

Official U.S. employment data due later on Friday are expected to show fell by 8 million in May, while the is forecast to soar to 19.8%, from 14.7% in April.

Sterling has also posted gains Friday, with up 0.5%, at 1.2652, at levels not seen for almost three months.

That’s despite the fact that the fourth round of EU-U.K. future relationship negotiations is set to  conclude later Friday, with little evidence emerging of any major breakthroughs. This could weigh on the pound going forward.


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Source: Forex – Euro Strengthens as ECB Generates Optimism

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