Renewed restrictions point to European economic stumble
|Executive Summary
- With the resurgence in COVID cases across the northern hemisphere, many governments have re-imposed restrictions or closures as well as stay-at-home orders in an effort to curb the second wave of infections. Several countries, including the United States and in Europe, have announced school closures, restrictions on public gatherings as well as restrictions on some workplaces such as restaurants, bars and other public facilities. The United Kingdom has experienced the highest number of COVID deaths among the European countries, prompting the government to re-impose partial lockdown measures.
- One standout during the pandemic has been Sweden, as the Swedish government first elected not to pursue stringent lockdown measures similar to those adopted in many other Western nations during the initial spread of COVID. Now, as the rate of COVID infections has surged, the government opted for a somewhat stricter approach, including a partial lockdown on bars and restaurants, in addition to other social distancing advisories.
- Given the renewed imposition of restrictions, we believe the potential for an economic stumble has increased. We now look for a renewed decline in Eurozone Q4 GDP, which could restrain the euro over the near term. Meanwhile, the United Kingdom is also set for a decline in Q4 GDP growth, and we expect the British pound to remain a relative underperformer among the G10 currencies.
Surge in COVID Cases Threatens Economic Growth
- As COVID cases over the past few months have climbed higher, many governments have reimposed stricter public health measures in an effort to slow the spread of the virus. European countries were hit particularly hard, and although the seven-day average of cases has begun to fall in some European countries, confirmed new cases remain well above their spring-peak.
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