Prospects for EUR / USD still bullish, more stimulation expected

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Source: IG Graphics

Fundamental forecasts for the euro: bullish

  • The 750 billion euro package proposed by the European Commission to help the EU economy recover from the coronavirus pandemic will likely be the focus of attention this week.
  • It should be discussed at the Eurogroup meeting on Thursday and hopes for a deal should keep the EUR / USD on an upward trajectory, even if the plan requires the agreement of the 27 EU member states, which which is unlikely for several weeks.
  • For the time being, the EUR is reacting positively to the latest stimulus measures from the ECB and Germany as well as the European Commission, and will probably continue to do so.

Euro price outlook still positive

This week, attention will likely focus on the European Commission’s proposal 750 billion euros help the economy of the EU recover from the damage caused by the Covid-19 pandemic. It should be discussed on Thursday at a meeting of the Eurogroup, the informal body where ministers ofEUrozone Member Statestalk about questions relating to their shared responsibilities for the euro.

The road to agreement will be difficult. Last week, for example, the Finnish government said it would reject the proposal in its current form. However, the Eurogroup will likely pave the way for the plan to be discussed by EU heads of state and government at a European Council meeting on 19 June, paving the way for an agreement later this year. summer, and that should keep the euro heading higher.

EUR / USD price table, daily calendar (February 20 – June 4, 2020)

EURUSD Chart

Graphic by IG (You can click on it for a larger image)

EUR / USD
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In general, monetary and fiscal measures aimed at stimulating growth tend to weaken currencies, but for the moment they are welcomed by markets fearing a slow and weak recovery from the economic crisis caused by the spread of the coronavirus. The euro therefore benefits from what appears to be an unusually coordinated response from the EU authorities.

In addition to the Commission’s plan, the European Central Bank announced last week that it would increase its bond purchases by more than € 600 billion to € 1.35 billion and that its purchases would continue at least until the end of June next year. , six months longer than expected. Also last week, the German coalition government said it had agreed on a 130 billion euro fiscal stimulus package that will cut taxes and give 300 euros per child to each family.

Week ahead: Industrial production and trade

Regarding economic data, the coming week is very light on the statistics. Industrial production figures are expected for Germany, France and the euro area as a whole, but are not expected to have an impact on the euro. Likewise, German and French trade data and the third estimate of euro area GDP growth in the first quarter can probably be safely ignored by traders.

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