Source: IG Graphics
Fundamental forecasts for the euro: bearish
- Last week, a virtual meeting of eurozone finance ministers once again highlighted the divisions between them, better to protect the area from the economic impact of the coronavirus pandemic.
- Their quarrel over loans to hard-hit countries like Spain and Italy, the region’s rescue fund and “coronabonds” underscored the downside risks to the euro in the long run.
Euro price outlook deteriorates
Last week, a videoconference of members of the Eurozone’s informal Eurogroup of finance ministers once again highlighted the deep divide between the wealthiest members of northern monetary union, like Germany and the Netherlands, and their poorest neighbors to the south.
The virtual meeting aimed to design a coordinated response to the economic fallout from the Covid-19 pandemic But rather highlighted the abyss on the conditions for granting loans to hard-hit countries like Spain and Italy Eurozone rescue fund, the european stability mechanism, as well as the problem of common debt, doubled“coronabond“, as part of a package to compensate for the economic damage caused by the spread of the virus.
For EUR / USD traders, the Eurogroup meeting was overshadowed by news on Thursday that new weekly jobless claims in the United States had exceeded six million for the second consecutive week and by the new package of 2, $ 3 trillion from the Federal Reserve to boost local governments and small and medium businesses. medium-sized businesses.
EURUSD price table, daily calendar (January 2 – April 9, 2020)
Graph by IG (You can click on it for a larger image)
Data provided by
of customers are long net.
of customers are net short.
However, the open disagreements between the countries of the euro area – and the language of confrontation used – must be negative in the long term for the euro. Prime Minister of Italy Giuseppe Tale went so far as to say the BBC that the EU risksedcollapseDue to the coronavirus crisis. “If we don’t take the opportunity to breathe new life into the European project, there is a real risk of failure,” he said.
This does not mean that the eurozone countries will abandon the euro anytime soon. However, the risk of rupture has reached its highest level in three years according to Sentix, a company based in Frankfurt which provides sentiment research and data, leadsglobal Iinvestor surveys and mmutual and institutional funds using an approach to behavioral finance
Sentix Euro Break-Up Index Chart, monthly calendar (June 2012 – March 2020)
Source: Refinitiv Datastream / DailyFX
Week to come:
Looking to the immediate future, traders will need to focus again in the coming days on government and central bank efforts to control the spread of Covid-19 and its economic impact, with any signs of progress likely to spur EUR / USD short term. The data is unlikely to have as much impact as usual. The only major euro area statistics to watch are the final German inflation figures for Thursday for March and the euro area industrial production figures for February, plus the final euro area inflation figures for March.
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— Written by Martin Essex, analyst and publisher
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