Britain’s economy grew for a third month in a row in July as pubs, restaurants and other sectors reopened after the coronavirus lockdown. Despite the growth, the economy remained around 12% smaller than its pre-pandemic level. After crashing by a record 20% in the second quarter, output expanded by 6.6% in July. Britain’s economy suffered more than any Group of Seven nation in the April-June period. Output in Britain’s dominant services sector was a bit weaker than expected, growing by 6.1% in July. This included a 141% jump in accommodation and food as lockdown measures eased, but that sector’s output was still 60% lower than in February.
ECB President Christine Lagarde said the bank is keeping an eye on the strength of the euro but sees no immediate need to intervene. Her comments licensed the single currency to resume its climb against the dollar. European shares turned flat after opening marginally lower following ECB’s decision to hold rates steady. The euro was volatile, first trading 1% higher to $1.1917 after Lagarde insisted the bank does not target the exchange rate, before falling back to around $1.1844 as a US equities slump lifted the dollar.
The dollar was poised for a weekly gain as sharp movements in equity markets had investors move to safer assets, while sterling tracked toward its worst week since March on fears of a messy hard Brexit. The yen was broadly steady for the week at 106.21 per dollar. The Australian dollar rose 0.3% to head toward a flat finish for the week at $0.7290, while the New Zealand dollar edged 0.1% higher to $0.6675. Bond inflows have not been enough to prevent a nearly 1% fall in the kiwi this week. The pound touched a six-week low of $1.2773. It has lost 3.5% on the dollar this week and about as much against the euro at 92.26 pence.
The European Union gave Prime Minister Boris Johnson until the end of the month to back down from the UK government's plan to rewrite the withdrawal accord. The ultimatum comes after another week of negotiations between the two sides failed to bridge divisions. Germany’s ambassador to the UK, Andreas Michaelis, tweeted: “In more than 30 years as a diplomat I have not experienced such a fast, intentional and profound deterioration of a negotiation”. EU lawyers stated that the UK has already breached the withdrawal agreement just by tabling the legislation, namely the “good faith” condition agreed in the treaty at the beginning of the year. The EU is threatening legal action unless he backs down within three weeks.