The pound-euro exchange rate (GBP / EUR) rose on Monday morning. This left the pair trading 0.2% higher at € 1.1091.
The riskier pound was able to make gains today as risk sentiment edged up despite the congressional standoff between Republicans and Democrats.
US President Donald Trump has signed a number of executive orders to help ease the coronavirus crisis. These orders included a $ 400 per week increase in unemployment benefits.
However, the gains have been limited as the United States will need a larger package to help support the economy in the future due to the extent of the damage from the coronavirus crisis.
Meanwhile, the British pound likely continued to be supported by the increase in Brexit optimism last week. UK Prime Minister overseeing Brexit negotiations Michael Gove has said he is confident a UK-EU free trade deal will be concluded on time.
Gove noted that there has been a distinct change in tone from the EU in recent weeks, which has allowed some progress to be made.
Speaking to journalists in Northern Ireland, Mr Gove said:
“I’m confident there will be a deal, I think there has been a welcome change in tone over the past few weeks.
“Omens are good for a bargain. Now, of course, there are some tough discussions to be had. I believe that the negotiations will lead to a positive result.
“The relationship we have with the European Union is constructive, pragmatic and impressive. “
Meanwhile, the single currency remained under pressure after the Banque de France revealed that economic activity was below normal in July.
France’s economic activity was 7% below usual levels in July, although this was a slight improvement over June data.
The country’s construction sector has approached pre-coronavirus levels as industrial capacity use has increased slightly.
The Banque de France said the bloc’s second-largest economy contracted by -13.8%, as forecast. The bank noted:
“The rebound continued in July, at a more moderate pace, in line with the trajectory anticipated last month. “
Data for June showed activity was -9% below normal levels, while the first two weeks of March saw economic activity -32% below standard levels.
Meanwhile, in the bloc’s largest economy, Ifo noted that businesses expect public life to be limited for an additional 8.5 months due to the coronavirus crisis.
Those hardest hit by the crisis, the leisure companies, are incredibly pessimistic and expect the restrictions to last for another 13 months. The beverage industry is more bullish and expects the restrictions to end in around 6.4 months.
UK unemployment data at a glance
Looking ahead to Tuesday, the British Pound (GBP) could suffer losses against the Euro (EUR) following the release of the latest UK employment statistics.
Data is expected to show the country’s unemployment rate edged up in June and average incomes fell, which will weigh on sentiment for the pound sterling.
However, if the change in the number of claimants in July reveals that the number of Britons claiming unemployment benefits has fallen again, gains in GBP could be limited.
Meanwhile, the latest German Economic Sentiment Index could offer the single currency some upside support.
If economic sentiment in the bloc’s largest economy jumps higher than expected in August, it will boost the euro. This will cause the Pound Euro (GBP / EUR) exchange rate to fall.