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