Euro weakens on virus woes, pound falls on Brexit stalemate

·3-min read
While new virus infections are rising across Europe after lockdowns were eased, the World Health Organization says a return to full stay-at-home measures would not be necessary

The euro, which hit two-year highs against the dollar this week, fell Friday as data showed eurozone economic activity slowing in August against a backdrop of rising coronavirus cases.

The pound also fell against the dollar as the EU and Britain traded blame for the lack of progress after the latest round of post-Brexit trade talks, with Brussels warning that a deal looked unlikely.

Sterling is being punished "by Brexit talks which seem to be going nowhere," said Neil Wilson, analyst at

"The two sides are still far from reaching agreement on key terms" of their post-Brexit relationship. 

In the eurozone, IHS Markit's closely-watched PMI index fell to 51.6 points from 54.9 points in July, although that was still above the key level of 50 points that indicates growth.

"The euro's rally has come to a halt this week on growing concerns that coronavirus is coming back strongly in parts of Europe and will hurt the economic recovery," said Fawad Razaqzada, market analyst with ThinkMarkets.

"In fact, economic activity has already slowed down according to the latest Purchasing Managers' Indices from Germany and especially France, where COVID-19 cases have risen sharply since July."

European stock markets ended the week in the red, with London's FTSE slipping 0.2 percent on Friday, Frankfurt's DAX 30 shedding 0.5 percent and Paris's CAC 40 down 0.3 percent.

On the other side of the Atlantic, Wall Street followed up a record close with a more cautious showing on Friday, amid protracted political uncertainty over a new spending package. 

While vast central bank support has helped fan a surge in equities globally, economic data showed that 1.1 million Americans made new claims for unemployment benefits last week, reinforcing concerns about the world's biggest economy.

However, observers said the reading could give warring lawmakers in Washington the kick-start they need to agree a new rescue package, having failed to reach a consensus after two weeks.

- Vaccine hopes -

There is some optimism nevertheless that a COVID-19 vaccine can be found. 

Pfizer and BioNTech SE said a vaccine they are working on could be up for regulatory review by October and, if all goes well, the jab could be ready to roll out as soon as November.

While massive financial support from central banks and governments has been crucial to helping economies, a vaccine for a disease that has killed already nearly 800,000 people and infected more than 22 million is seen as paramount.

The vaccine news "has raised some expectation... that life around the world could return to normal sooner than expected", said AxiCorp's Stephen Innes.

"This is not only good for market concerns, this is a world desperately anxious for a cure to put an end to the most severe global recession since the 1930s," Innes said.

"From a stock market concern, it's great for growth assets as planes will fly, the oil will flow, and laggard industries will emerge from the COVID-19 fog and their stocks will soar."

- Key figures around 1545 GMT -

New York - Dow: UP 0.2 percent at 27,797.14 points

London - FTSE 100:  DOWN 0.2 percent at 6,001.89 (close)

Frankfurt - DAX 30: DOWN 0.5 percent at 12,764.80 (close)

Paris - CAC 40: DOWN 0.3 percent at 4,896.33 (close)

EURO STOXX 50: DOWN 0.4 percent at 3,258.75

Tokyo - Nikkei 225: UP 0.2 percent at 22,920.30 (close)

Hong Kong - Hang Seng: UP 1.3 percent at 25,113.84 (close)

Shanghai - Composite: UP 0.5 percent at 3,380.68 (close)

Euro/dollar: DOWN at $1.1777 from $1.1860 at 2045 GMT

Dollar/yen: UP at 105.90 yen from 105.78 yen 

Pound/dollar: DOWN at $1.3099 from $1.3215

Euro/pound: UP at 89.90 pence from 89.74 pence

West Texas Intermediate: DOWN 2.4 percent at $41.59 per barrel 

Brent North Sea crude: DOWN 2.7 percent at $43.68 per barrel.