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09:37
What is the strength of the euro, brother? In unity! Europe begins to act as a single fist

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Good news from Europe and wounded by a swift rally S&P 500 US dollar. What could be better for the bulls on EUR / USD? The main currency pair managed to mark the fastest growth since the end of March against the background of the joint desire of Germany and France to take responsibility for the fate of the EU and the ECB's intentions to protect the eurozone countries affected by the pandemic to the last drop of blood. The statement by the biotechnological company Moderna added that fuel to the fire was that the vaccine she developed could create the necessary immune system response to coronavirus, which allowed American stocks to soar above April correction highs.  

 

 

 

 

The failure of the eurozone countries to agree on a fiscal stimulus, including the failure of the idea of ​​issuing coronabond, the unexpected decision of the German Constitutional Court, supposedly limiting the ECB’s ability to save the currency bloc’s economy, and the high demand for greenback as a safe haven because of expectations of the S&P 500 sale wave kept “ bulls ”on the euro in the stall. As soon as their opponents' trump cards were broken, the EUR / USD pair went uphill. 


Angela Merkel and Emmanuel Macron voiced a proposal to create a fund of € 500 billion, which will provide grants to the most affected by COVID-19 EU countries. It is noteworthy that it is planned to form its resources by issuing bonds, which will be repaid from the budget of the European Union. Let me remind you that the lion's share of its expenses is covered by the Germans. It seems that the coronabond can still be, albeit in a slightly different form than originally assumed. According to the German Chancellor, the EU must act together, if the members of the union act alone, they have no chance. 


The euro was supported by the lack of concern of Christine Lagarde both regarding the QE pandemic and the quantitative easing program launched in 2015. The ECB sees no obstacles to achieving its goals, and each national bank in the euro area is independent and cannot receive instructions from the government. It seems that the European regulator does not intend to give an answer to the judges from Karlsruhe and is not going to stop supporting the countries affected by the pandemic. First of all, Italy, the growth of debt of which, according to Bloomberg, may become uncontrolled. As a result, Rome will face the need for debt restructuring. 

 

The dynamics of the public debt of Italy

   

Source: Bloomberg. 

 

Positive from Germany and France, coupled with a clear ECB position, allowed the euro to come to its senses. Moreover, the US stock indexes extended her helping hand, encouraged by reports of a vaccine, studies by South Korean scientists that people who had been ill with COVID-19 were not contagious, and Jerome Powell’s statement about the Fed’s readiness to keep the rate close to zero until the central bank make sure that the economy has survived all the hardships. The EUR / USD pair managed to rise above the base of the 9th figure, and if the US-China trade conflict did not escalate, it is able to continue the rally in the direction of the upper boundary of the medium-term trading range 1,065-1,115.

 

Analytics LiteForex  Demidenko Dmitry

 

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