Let's see how long this pullback will last

EUR/USD Trying to Decide at the 200 SMA, After Rallying on EU Reconstruction Plan

Posted Monday, May 18, 2020 by
Skerdian Meta • 2 min read

Earlier today we heard rumours that Germany’s Angela Merklel and France’s Emanuel Macron would propose a coronavirus reconstruction plan. We don’t exactly know how the plan will be but they are already working on a fund for the recovery, similar to the Marshal Plane probably. Although, at just 500 billion, I don’t think that’s enough. The US is already spending several trillions of dollars. Below are their comments:

Merkel said
  • We need a European recovery fund, Germany and France discussed that this today
  • We must act in the European way so that we all get out of this crisis well
  • Goal is that Europe comes out of crisis stronger
  • The recovery fund that should give grants, not loans to member states
  • Fund must be in line with EU law
  • There is a possibility of EU treaty changes in the longer run, but now it’s about agreeing on a short-term measures
  • It is crucial that EU bonds will be paid back via EU budget, national parliaments will have to give green light

Macron comes out with his statement:

  • Call for EU public health sovereignty, say objective should be to develop vaccine within EU over the short term
  • Jointly called for increase of European budget over 1st few years
  • Call for ambitious, temporary and targeted recovery fund within MFF
  • Propose to authorize European commission to find recovery by borrowing through financial markets in the EU’s name
  • Recovery fund should be given €500 billion for EU grants to go to hardest hit sectors and regions
  • Recovery fund will be integrated in decision on EU’s own resources with clearly identified volume and expiry date
  • A quick EU agreement on MFF, recovery fund is necessary
  • This recovery plan will be supported by commitments from member states to undertake healthy economic policies and reform program

The Euro has surged on this news and EUR/USD is more than 100 pips higher today. This pair climbed above 1.09, but has retreated a little now and is trading around 1.09. I don’t understand this rally, because the amount is not anything extraordinary, with what we have seen in recent months from other central banks and governments.


Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Related Articles
0 0 vote
Article Rating
Notify of
Inline Feedbacks
View all comments