Forex Review: GBP soars as UK is going to "coexist with virus”

As the U.S. dollar index fell from the midweek high of 92.844 recorded since April 5th and closed down, the euro closed up 0.10% to 1.1877 against the dollar, and rebounded from the intraday low of 1.1780 recorded since April 5th. Although the European Commission raised its economic growth forecast, the European Central Bank’s new deal did not promise to allow inflation to exceed the target, limiting the euro’s gains.

The pound against the dollar closed up 0.58% this week to 1.3906. The British reopening plan is the reason for the strong pound. The United Kingdom is expected to lift restrictions related to the new crown epidemic in two weeks, becoming the first major country to officially start accepting the presence of the new crown virus.

Concerns about the DELTA variant virus have intensified, and the yen’s safe-haven status has been significantly improved. The dollar closed down 0.82% to 110.11 against the yen, hitting a new low of 109.52 since June 11. The EU Executive Committee warned that the risk of the epidemic remains high. The Japanese government is preparing to declare a state of emergency in Tokyo this month.

European raises economic growth forecasts

The European Commission raised its economic growth forecast for the euro area on Wednesday. It is expected that the euro area economy will grow by 4.8% this year, driven by the economic restart in the second quarter and the hope that the tourist season will improve. This is much faster than the 4.3% forecast in May. The momentum of recovery from the economic crisis triggered by the epidemic is expected to continue next year, when the euro zone is expected to grow by 4.5%, exceeding the 4.4% estimated in May.


However, the European Commission warned that its estimates are based on the assumption that pandemic restrictions will be further relaxed in the second half of 2021. Therefore, the risks related to the outlook remain high, even though the EU believes that the risks are balanced.

Paolo Gentiloni, Commissioner for Economic Affairs of the European Commission, said at a press conference: “The spread of the Delta variant virus reminds people that we have not yet come out of the shadow of the epidemic. But at present I don’t think Europe will have a big future. New restrictions have been introduced on a large scale."

Morgan Stanley economists wrote in a report to clients: "Even with the more benign situation of the Delta virus, we now expect it to cause more international travel restrictions, which will be the second in a row. Summer hits the vital tourism industry in Southern Europe."

European Central Bank sets 2% inflation target

The European Central Bank set a new inflation target on Thursday and will play an important role in combating climate change. The most powerful financial institution in Europe is embarking on the largest reform in its 23-year history.

Since the inflation rate has not reached its target in the past 10 years, European Central Bank President Lagarde conducted an 18-month assessment of the bank’s internal operations and even challenged the central bank’s basic principles in order to reformulate its strategy and enhance credibility. degree.

The key conclusion of the European Central Bank's policy evaluation is to set the medium-term inflation target at 2%, abandoning the previous target of "below but close to 2%". The previous goal gave the impression of being more worried about price growth higher than the goal.

Lagarde said at a press conference introducing the assessment: "We know that inflation will not always remain at the 2% target level. Sometimes it may be slightly lower than the target, temporarily deviating from the target in two directions. This is nothing. "

The European Central Bank acknowledges that, in some cases, when particularly strong or sustained monetary support is required, inflation may moderately exceed the target in the short term. But after a long period of low inflation, the new policy did not promise to let inflation exceed the target, which may disappoint investors who are looking for such a promise, because this promise will ensure that the stimulus measures continue into the recovery phase.

Economists at ING said the move meant that the European Central Bank was “more dovish in structure”. But it also pointed out that this is the gradual evolution of the ECB's inflation target from the initial "less than 2%" to the latest statement.

Britain will lift anti-epidemic restrictions on July 19

Despite the surge in new crown cases, the UK's reopening plan is responsible for the strength of the pound. The United Kingdom is expected to lift restrictions related to the new crown epidemic in two weeks, becoming the first major country to officially start accepting the presence of the new crown virus.


British Prime Minister Johnson announced on Monday a plan to end England’s social and economic anti-epidemic measures in two weeks. This will test whether rapid vaccination can provide sufficient protection against highly infectious Delta mutant strains.

Johnson confirmed that the government’s goal is to end the restrictive measures on July 19 and the final decision will be made next week. He said the move will remove formal restrictions on social contacts, cancel instructions to work from home, and injunctions to wear masks. British Transport Secretary Grant Shapps said that from July 19, UK residents who have been fully vaccinated will no longer need to be quarantined when returning from a medium-risk country.

Last month, the last step to relax the lockdown was postponed for four weeks to allow more people to be vaccinated, as the now dominant Delta variant virus promoted the rise in new crown cases. However, the British government said that data shows that as restrictions are relaxed, cases will continue to increase, but vaccination has reduced the link between infection and hospitalization and death.

Japan's economic growth is expected to slow down

The dollar closed down 0.82% to 110.11 against the yen, and hit a new low of 109.52 since June 11. Because the Delta virus variant is spreading around the world, concerns that it may hinder the recovery of the global economy have hit investor confidence.

According to the Nikkei report, the Japanese government is preparing to declare a state of emergency in Tokyo this month to deal with the rise of new crown virus infections, and will continue the state of emergency until August 22 after the end of the 2020 Tokyo Olympics. This move may suppress consumption.

South Korea reported a record high of new cases of new crowns in a single day, and officials are considering further tightening of social distancing measures.

The Delta variant virus has now appeared in more than 90 countries. According to the genetic company Helix, the Delta variant virus has become the main strain of new coronavirus cases in the United States.

Commodity currency narrows decline

The U.S. dollar against the Canadian dollar hit a new high since April 21 to 1.2590, but as oil prices rebounded, the exchange rate narrowed its gains, closing 0.98% higher to 1.2440 in the final session. Canada's job growth in June exceeded expectations, and the gap between the number of jobs and the level before the outbreak of the new crown epidemic narrowed to less than 1.8%.


The Australian dollar closed down 0.47% to 0.7487 in the final trade, rebounding from an intraday low of 0.7406 since December 9 last year. The New Zealand dollar closed down 0.48% against the U.S. dollar at 0.6995, the intraday low of 0.6820, the lowest level since June 18.


John Doyle, vice president of trading at Tempus, a foreign exchange trading company, said: "At first I thought that the risk of the Delta variant virus was most obvious in the movement of the pound. Now I think it is most obvious in the Australian and New Zealand currencies, which are closely linked to Asian risk appetites. ."

Commonwealth Bank of Australia (CBA) strategist Joseph Capurso wrote in a research report that our latest forecast is that these currencies will perform weakly before the end of the year. The Australian dollar is expected to fall to US$0.72 and the New Zealand dollar is expected to fall to US$0.6650.