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Euro at Multi-Month Highs as Deal Within Reach

Market Drivers July 20, 2020

  • EU officials getting close to EU stimulus deal
  • US equity markets pin hopes on vaccine
  • Nikkei -0.09% Dax 0.56%
  • UST 10Y 0.61
  • Oil $40
  • Gold $1810/oz
  • BTCUSD $9208

Asia and the EU

  • No Data

North America 

  • No data

After a sluggish start to the trading week that saw equities decline in Asia and early European trade, risk sentiment improved on hopes of a compromise for an EU stimulus package and news of a possible new COVID vaccine from AstraZeneca.

Euro hit multimonth highs rising above 1.1450 level on news that EU officials were narrowing on a compromise package of 390B in grants and a similar amount in loans as the “frugal four” appear to have agreed to almost the full level of grants initially proposed by EU. The negotiations remain ongoing but with the core agreement in place, the markets are optimistic that a deal will be done.

Although the full stimulus package falls short of initial targets it nevertheless marks the first time that the European Union has decided to issue significant amounts of federated debt and also agree on mutualization of stimulus measures that could provide much-needed relief to the region’s weakest members.

The news should continue to boost the euro especially in light of the fact that Europe appears to have much better control over COVID right now and can expand its economic activities while the US faces massive pandemic outbreaks in the South and Southwest of the country. If the EU authorities actually ink a deal the single currency could move through the 1.1500 barrier on hopes an economic rebound.

In the US today the calendar is barren but the markets will be eager to hear the latest vaccine news from AstraZeneca on hopes that this particular version could offer more durable immunity to the virus. The tech-heavy Nasdaq is back in the lead this morning after showing relative weakness last week and if the news on the medical front proves positive investor enthusiasm could push it higher as the day proceeds.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Boris Schlossberg

Mr. Schlossberg is a regular contributor to CNBC's Squawk Box and a commentator for CNBC Asia and CNBC Europe. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Mr. Schlossberg has written for SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is the author of Technical Analysis of the Currency Market and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game, both of which are published by Wiley

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