EUR/USD Trying to Decide at the 200 SMA, After Rallying on EU Reconstruction Plan - Forex News by FX Leaders
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.

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About the author

Skerdian Meta // Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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