15April, 2020No Comments|| 2
While the EURUSD has been on a bearish run in the past month, the EUR was able to make a recovery reaching a monthly high at 1.1039. It tested the 1.0636 level before shooting upward.
EU Stimulus Package Fuels Upward Movement
The main reason as to why the EURUSD was able to jump further than the highs of the previous week is due to the agreement among all EU Finance Ministers to push the EUR 540B stimulus package in order to fight the spread of the Coronavirus.
Along with that, the European Central Bank (ECB) may hold its current monetary policy while the Pandemic Emergency Purchase Programme is implemented. This will be known on the next meeting at the end of April.
At the same time, French Finance Minister Bruno Le Maire stated that 60% of the Fresh industry has already started running. This has also helped fuel the upward movement of the currency.
EURUSD Under Pressure From the IMF Forecast
The recent upward movement does not mean that the EURUSD is in the safe zone yet. The ECB may possible face some pressure if the International Monetary Fund (IMF) predicts the Euro Zone to be one of the advanced economies with the slowest economic growth (next to the American economy).
According to ECB Vice President Luis de Guindos, the European economy will face a recession if the global economy will have one. He believes that 2021 will be the year that we may see true economic recovery.
The EUR In the Next Few Days
As of current, the ECB is reliant on asset purchases in order to soften the blow to the Euro Zone’s economic situation. The Governing Council may also start moving the economic policy into extreme levels in order to adjust its other instruments.
With the release of the French retail sales data, the ECB also believes that the economic downturn of the Euro Zone due to the Coronavirus is only temporary should the situation be managed properly.
Overall, it is possible to still see some upward movement following the currency’s bounce from the 1.0636 level. However, the IMF forecasts will play a big role on whether or not the EUR can sustain the movement.
We will have to wait and see.
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