Euro Slid this week: European Leaders Fail to Agree on How to Finance their Coronavirus “Recovery Fund”

Lebanese Forex Market

The Lebanese Pound (LP) remained steady within the official range of $/LP 1,514 – 1,514.5 against the dollar, with a mid-price of $/LP 1,514.25 by the week ending April 24th 2020.

To-date, the peg continues to be supported by the Central Bank’s total foreign assets which settled at $34.7B by mid-April 2020.

In turn, the dollarization ratio of Private sector deposits surged to 77.63% in Feb. 2020, up from 70.6% during the same period in 2019.

Over the week ending April 24th, the Euro depreciated vis-à-vis the dollar-pegged LP with the currency pair going from last week’s €/LBP 1,636.78 to this week’s €/LBP 1,624.43. In turn, the Nominal Effective Exchange Rate (NEER) of the LBP rose by a marginal 0.39% over the week to stand at 124.51 points by April 24th 2020.

International Forex Market

The Euro/USD currency pair went from last week’s €/USD 1.0858 to €/USD 1.0776 by April 24th. The Euro’s depreciation is largely the result of the European Bloc failing to agree Thursday (during a video conference) on the details of a mechanism to finance urgently-needed aid via a joint “recovery fund”. Noting that the latter’s purpose is to empower and help rebuild the EU economies ravaged by the coronavirus pandemic, the northern v/s periphery nations remained at odds regarding the financing of that fund through grants and/or loans, which would impact the sovereigns’ debt bill(s).   


Meanwhile, the increase in international gold prices continued, with the price of an ounce of gold adding a weekly 0.8% to stand at $1,731.3/ounce this week. Interestingly, the increase in gold prices was softer over the week ending Apr. 24th, owing it to widespread US and European stimulus (relief) packages announced this week to face the pandemic. In fact, gold is considered a safe store of value amid uncertainty and is also considered a form of “hedging” against inflation and currency threats when central banks are devising stimulus packages.  

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