GBP opened strongly this morning as markets reacted to the positive news that Boris Johnson is now out of hospital and recuperating at Chequers, his country retreat, as Downing Street confirms that he “continues to make good progress.” The GBPEUR interbank rate hit a 5-week high at 1.1519 this morning as markets resumed following the extended Easter weekend.
Boris Johnson’s health has been a concern to financial markets as he is seen as a competent and strong leader for the UK. Government action in response to the Covid-19 crisis is a key factor in assessing how well a country and economy will be able to recover from the outbreak.
Lockdown in Spain and Italy Relaxed Amid Economic Concerns
Workers in Spain took tentative steps back to work today as lockdown measures were partially relaxed to allow mainly construction and manufacturing workers back to work amid fears of complete economic stagnation taking hold.
In Spain, during the past fortnight only workers in essential sectors like health, police and the army have been permitted to go to work as the rate of deaths has begun to slow. In Italy, the European epicentre for the outbreak of the virus, some shops have been allowed to open as the number of new cases continues to decline. For Italy the country will formally remain on lockdown until at least 3rd May.
European Finance Ministers Reach Agreement on Emergency Aid Package, but the Fine Print Leaves Many Unanswered Questions
After extended negotiations, Finance ministers from all states who have adopted the Euro have finally agreed on an economic rescue package worth approximately 500billion euro’s to help cover the cost of fighting the health crisis bought by Covid-19. At face value, this could help prop up the economy of the eurozone however, the response in the euro’s value has been muted as commentators focus on the underlying limitations of the agreement.
Linked to the economic stability mechanism (ESM) national debt levels were already spiralling way beyond those acceptable in EU Law for both Italy and Spain which could limit their access to this support package. The crux of the issue, as always within the EU, is who is paying for who’s debt. These uncertainties need to be ironed out before the euro can really feel supported by these moves. As GBP/EUR pressures the 1.15 pivot, exchange rate markets continue to look for direction this week.
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