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Pound and euro failed to grow on hopes for new large-scale incentives (it seems that the EUR/USD and GBP/USD pairs will continue

The data on the number of applications for unemployment benefits in the States released on Thursday turned out to be higher than expected and became a catalyst for a moderate, but time-limited increase in demand for risky assets, which in turn, contributed to the depreciation of the US currency.

The main negativity for the markets is still the coronavirus issue, which successfully restrains the positive stream from the restoration of economic activity in the economically important countries of the world, primarily in the United States.

Recently, the single currency and the British pound have received good support. The main factor remains the issue of expanded stimulus measures for the economies of the eurozone and the UK. As for the situation regarding the demand for the euro, it is formed thanks to the hopes that, despite the existing contradictions between the countries in the EU, a decision will be made on July 18 on how the European Recovery Fund will operate. This is the main factor. However, there is another important reason for the strengthening of the euro against the dollar - this is the growing tendency of investors to take a risky game, to buy shares of companies.

The British currency has also recently begun to grow actively, on the one hand, in the wake of the decision of the Bank of England to expand incentive measures, as well as the recent proposal by the UK Treasury Secretary to put in place an £ 30 billion unemployment plan. In addition, the plan includes a fund of £ 2 billion to create new jobs for the unemployed, £ 3 billion of energy-saving costs for homes and public buildings, and a decision to reduce VAT for the tourism and catering sectors was also announced.

The market has not yet responded to the Brexit issue, which could very likely put pressure on the British currency again. Earlier, the Fed Chancellor, A. Merkel expressed concern over Britain's exit from the EU without a deal, which was the reason why the pound is weak in the currency market for many years.

In general, considering the prospects for the euro currency and pound, we believe that their growth against the dollar is fundamentally motivated, but may be limited due to the uncertainty of the consequences of the coronavirus infection pandemic and the continuing demand for the US currency as a safe haven currency. Radially, the situation will change only if a really effective vaccine for COVID-19 is discovered. However, the lack of an opportunity to understand when this will happen is the main limiting factor in all financial markets, and not just in the currency market.

Forecast of the day:

The EUR/USD pair is under pressure once again in the wake of declining risk appetite in the markets, driven by rising coronavirus outbreak in the United States. The price is above 1.1260, if the mood of the market improves, the pair will begin to grow again to 1.1350. At the same time, if it declines below the level of 1.1260, we should expect its fall to 1.1175.

The GBP/USD pair as well as EUR/USD is balancing between growth and decline in the wake of the general situation in global markets. If it does not rise above the level of 1.2600, it will continue to decline to 1.2460. But, if the situation in the markets calms down, then it is possible that the pair will resume growth to 1.2690.



The material has been provided by InstaForex Company -