Euro Lacks Direction Ahead Of EU Summit

The euro continues to lack direction ahead of the EU summit being held in Brussels later today. All 27 member states are set to continue discussions regarding a €750bn recovery plan, in what will be their first face-to-face meeting since the coronavirus crisis began. The EU’s seven-year budget will also be on the agenda, with opinions divided on economic policy.

The so-called frugal member states of Denmark, Sweden, Austria, Hungary and The Netherlands have provided the most vocal opposition to the proposed grants for countries hardest hit by the pandemic. They argue any money distributed should be done so in the form of loans that must be paid back, rather than grants that would not.

German chancellor Angela Merkel will be chairing talks that are expected to run over a majority of the weekend, with another meeting anticipated by the end of July if ending without a deal.

All this uncertainty and lack of consensus has left the euro in a state of flux over the last few months, trading between 1.1160 and 1.14 versus USD and €1.13 to €1.09 versus GBP since late May.

Elsewhere, the European Central Bank left monetary policy unchanged during its July meeting, holding the refinancing rate at 0% and the deposit rate at a record low of -0.5%. In addition, the central bank pledged to buy up to €1.35 trillion worth of debt through June 2021 under its Pandemic Emergency Purchase Programme.