Last week, the Euro pushed to the highest level seen against the US dollar since 2018 following the agreement between the EU 27 member states on how the Recovery Fund will operate. Leaders of 27 European Union countries reached a unanimous agreement on 750 billion euros ($860 billion) in coronavirus recovery funds, divided into grants worth 390 billion euros and low-interest loans worth 360 billion euros. It was the breakdown that took time to agree. It was vital that this was passed as the funds will be raised by the EU Commission using its AAA rating while there will be changes to EU rebates. The AAA rating means they will be able to borrow cheaper as a collective rather than individual countries; for example, Greece’s S&P rating is BB-, this is 9 notches lower than AAA. As a result, EURUSD has pushed circa 4.5% higher from the low of the month. In the meantime, sterling benefited against the US dollar as a result of the move on EURUSD but subsequently moved lower against the single currency. GBPUSD is now trading at its highest level since March against the US dollar despite ongoing uncertainty about the progress in talks between the EU and the UK on their future relationship. Economic data also helped pushed the currency higher as retail sales, service and manufacturing data all improved. The US dollar was on the back foot as concerns about deteriorating relations with China and that the US economic rebound is faltering prompted

Last week it was a mixed week both in terms of data and sentiment. Starting with the downside, Covid-19 concerns and Chinese tensions increased. There was a rise in Covid-19 cases in several countries last week. The US recorded a record high of close to 60k new cases a day, prompting some reversal of restriction easing. Latin American countries have also seen an escalation. In the UK, Leicester was put into lockdown again, as the rest of the nation reduced restrictions further. In the meantime, in the geopolitical arena China’s passed its Hong Kong national security law resulting in sanctions from the US, whilst the UK expressed it displeasure. Despite the negatives, we saw risk sentiment increase. Signs of improving economic conditions were helped by positive reports about progress in developing a Covid-19 vaccine. The headline data release was the US labour data; the US gained 4.8 million jobs in June, far better 3 million expected. In addition, the unemployment rate fell from 13.3% to 11.1%. Central Bankers have also noted that so far, the economic rebound was proving to be stronger than forecast, this may have added to the more upbeat mood. The UK/EU trade talks were slightly disappointing as discussions between the chief negotiators broke up a day earlier than expected; it is assumed they will resume in the coming week. However, supporting Sterling was Chancellor of the Exchequer Sunak’s update to the House of Commons regarding the economic outlook. PM Johnson said that the focus of