FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
FxPro information and reviews
HFM information and reviews

Euro could get positive boost from flash PMI figures

21 May 2020

The Eurozone’s flash PMI readings for the month of May will hit the markets on Thursday at 08:00 GMT, likely showing a reviving business sector as most member states moved forward with their re-opening plans. The data are expected to contribute to the bullish atmosphere the German-Franco deal for a virus relief fund created for the euro this week, exposing the currency to fresh buying pressure. On Friday, the ECB meeting minutes could clarify if there is any willingness for more monetary stimulus. 

Euro likes the German-Franco recovery fund proposal 

The lockdown measures squeezed business indicators to historic lows the past two months and set the stage for an imminent global recession, but in the EU’s case, investors have one more reason to worry about and that is a divergent political landscape.

With the European central bank out of bullets, EU leaders are seeking ways to raise funds to survive the covid-19 crisis. However, what was a more straightforward procedure in other countries appeared a struggle for the euro bloc as the idea of a common debt instrument aimed at the countries hardest hit by the virus, mainly in the south, found some strong resistance from key member states in the north. On top of that, the recent decision by Germany’s constitutional court that questions the legality of the Bundesbank’s participation in the ECB’s bond buying programs couldn’t have come at a worse time in undermining the ECB’s independence.

In market terms, the political uncertainty raised fears that failure to secure an appropriate rescue package on time could make any debt defaul difficult to be reversed, eliminating any appetite for the euro. Finally, the 27 member states agreed two weeks ago on a 540 billion euro safety net under the European Mechanism Stability program to take effect on June 1. Still, discussions over a joint recovery package and how this could be distributed remained in the air until the French President and the German Chancellor provided some feeling of hope on Monday, both announcing that a 500 billion fund would be raised by the European Commission on behalf of the whole EU to give grants and not loans mainly to the worst-affected national governments.

The proposal now needs parliamentary approvals from member states but the procedure may prove highly complicated in wealthier countries such as the Netherlands and Austria which continue to show opposition. Nevertheless, a common response between France and Germany always finds a way to come to the surface and that is making the euro shine this week, pushing it above the key 1.0770 support region and into the 1.0900 zone.

EU PMI readings to show improving business conditions

On Thursday, initial PMI figures out of the EU could further boost the positive sentiment if the manufacturing PMI bounces from 33.4 to 38 in May, as expected, and the services equivalent more than doubles its previous record low of 12 to 25, both reflecting improving business conditions. Perhaps the numbers cannot exclude another negative quarter in Q2 as long as the measures remain below the 50 threshold that separates growth from contraction, though they could have a positive impact on the markets that are closely following EU news this week. Better business readings could be released in the coming months too should governments allow air travel and more things return to normal, but any upturn should warrant some caution until fears of a second virus wave vanish.

ECB meeting minutes

Meanwhile, the ECB minutes from the April’s policy meeting are also on the agenda, with traders waiting more details on why the central bank decided to keep its main tools unchanged in April even as it pledged to inject more liquidity through its newly-introduced pandemic emergency bond purchase program and adjust its composition as much as it is needed.  Hence, any strong comment that reflects a muddy outlook on the EU economy and flags more QE increases in the future could pressure the euro, whereas a softer language may reduce the risk of additional stimulus actions, raising demand for the currency.

Where next for the euro?

From a technical perspective, the short-term bias is currently viewed as positive, with the bulls targeting the 1.0980 resistance level to stretch this week’s rebound towards the 200-day simple moving average (SMA) and the 1.1055 resistance.

On the downside, support to negative corrections could be met between the 1.0830-1.0890 restrictive region. A closing price below the 1.0770 base is expected to generate new selling.




The Downfall of Euro in 2022: the Analysis of its Reasons, the Current Situation, and the Objective Forecast
The Downfall of Euro in 2022: the Analysis of its Reasons, the Current Situation, and the Objective Forecast

Before getting down to analyzing why Euro reminds of a mafia victim in cement shoes falling off a Chicago bridge, allow us to open it up with a meme joke that best describes this whole ordeal...

31 Oct 2022

XAU/USD juggles around $1,710 as investors await US NFP
XAU/USD juggles around $1,710 as investors await US NFP

Gold price (XAU/USD) is displaying topsy-turvy moves in a narrow range of $1,709.35-1,713.42 in the early European session. The precious metal is displaying a lackluster performance...

7 Oct 2022

Positive mood stalls on the “pivot” trade
Positive mood stalls on the “pivot” trade

USD slid against most of its major peers. The DXY closed a tick above its lows of 110.05. Resistance is at 110.76 while next support is 109.29. GBP gained for a sixth session in a row, a winning streak not seen since April 2021...

5 Oct 2022

OctaFX glances at current economic shifts - the good, the bad, and the strange
OctaFX glances at current economic shifts - the good, the bad, and the strange

Pandemics and health crises, political tensions, geopolitical tension flashpoints popping up, Western sanctions on significant European and Asian economies, and grave tensions between...

3 Oct 2022

The Euro rebounded from the low
The Euro rebounded from the low

After updating its multi-year lows again, the major currency pair rebounded. The current quote for the instrument is 0.9656. Last night, the local interest in risks improved a bit, helping the asset to successfully correct...

29 Sep 2022

Gold Shows Signs of Life, But Heads Towards Another Losing Month
Gold Shows Signs of Life, But Heads Towards Another Losing Month

The precious metal is largely considered as a hedge to inflation, but it has not confirmed this status during the current year. It did kick it off with a rally, but as the Fed begun hiking rates back...

28 Sep 2022

Editors' Picks

IronFX information and reviews
FXCM information and reviews
NordFX information and reviews
MultiBank Group information and reviews
MultiBank Group
Vantage information and reviews
FP Markets information and reviews
FP Markets

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.