EU’s Recovery Fund Will Affect Euro’s Trend

May 22, from WikiFX news. Germany and France jointly proposed on the 18th to establish an European Union recovery fund to offer financial aids to members struck by the economic fallout of the pandemic. The news pepped up market confidence, sending the euro on a rally, though rather moderate in scale.

EUR/USD is recently near the 1.10 resistance level, very close to the pivot points of 200 day moving average. The forex research department of Credit Suisse observed that though the euro may still face pressures, there are still many factors to keep long-position holders excited. If an explicit, transparent and sustainable mechanism for fiscal risks diversion is established, the market would have less reason to have to price in longer term euro breakup risk.

The recovery fund could have long-lasting impacts on the European Union, and getting unanimous approval from the European Commission is the major challenge facing this initiative in the coming weeks, as Northern European member states are likely to oppose the plan.

Though many European countries acknowledge the significance of keeping the sustainability of both the euro and European Union, the more developed Nordic member states have always opposed sharing fiscal burdens and debts among member states, which will provide basis for forming a European Union finance ministry.