Euro firms up its gains as dollar dips further

David Hobart
Euro money: closeup of banknotes and coins

The single European currency continued to see big gains in the foreign exchange markets on Friday after the bloc’s central bank revealed a huge stimulus package.

The European Central Bank announced on Thursday that it would be ramping up its emergency bond purchase scheme by a figure of around 600 billion euros.

This was more than the markets had priced in, with many traders expecting a rise of just 500 billion euros.

This means that it will now offer an overall support package of around 1.35 trillion euros.

And it also made moves to create a longer timeframe, announcing that it would push the scheme’s dates into the middle of 2021.

The single currency benefitted enormously from this move, reaching $1.1362 at one stage on Thursday.

This represented its best performance for three months or so. By Friday it was bringing in $1.1338 at one stage.

Over the course of the week, meanwhile, the euro has managed to see a rise of over two entire percentage points in this pair.

It also surged to its best point in just over a year in its pair with the Japanese yen.

It reached 123.620 at one stage.

And in its pair with the Swiss franc it managed to get to its best point in five months at one stage on Thursday, reaching 1.0830.

The recovery fund is considered to be widely and urgently needed across the bloc.

And it has also been watched with interest by traders who are surprised at the decision of Germany, which is one of the bloc’s most powerful and richest nations, to support the fund.

Usually, Germany attempts to avoid such moves in case they run the risk of creating “fiscal integration” across the Eurozone.

The coronavirus pandemic, however, appears to have change the country’s perspective.

Analysts did go on to warn, however, that the European Union did now need to ensure that it built out its wide fiscal policy system – and ensure that it had the mechanisms in place to contend with the new fiscal responsibilities.

Elsewhere around the world, the US dollar index – which is a tool designed to monitor the greenback’s relationships with six major other global currencies – was showing more losses.

It was noted at 96.808 at one stage – which reflected what was likely to end as its third loss-making week in a row.

The dollar’s one major saving grace, however, was in its pair against the Japanese yen.

Here the greenback was seen at 109.235 at one stage, which was its best performance in two months.

The data coming out of the US at the moment is mixed.

The weekly round of information about jobless benefit claims revealed that the overall number of people in the country registering to receive assistance went under two million last week.

This was the only time so far that this had happened since the middle of March, when the pandemic’s economic effects set in.

But the figure is still extremely large compared to the last major US recession in the financial crisis.

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