- Euro (EUR) boosted by €750 billion Recovery Fund deal agreed to be €390 in grants and €360 billion in loans
- The fiscal stimulus will help guide the region out of its deepest recession since WW2
- US Dollar (USD) falls as stimulus deal and vaccine optimism lift market mood, reducing demand for the safe haven greenback
- California’s new covid cases reaches 12,000 a day as fears grow that economic data will start deteriorating
The Euro US Dollar (EUR/USD) exchange rate is advancing on Tuesday after mild gains in the previous session. The pair settled on Monday +0.05% at US$1.1446. At 07:00 UTC, EUR/USD trades +0.1% at €1.1462 around a 4-month high.
As talks entered the fifth day, EU leaders finally agreed on the EU Recovery Fund. This €750 billion stimulus programme is aimed at helping those countries most affected by the coronavirus pandemic and to guide the region out of its deepest recession since World War 2.
The stimulus will be divided as €390 billion in grants and €360 million in loans after the so called frugal four – the Netherlands, Sweden, Denmark and Austria opposed to the original plan of €500 billion in grants.
This has been hailed an historic moment for the EU although the process has been slow. Still the prospect of fiscal stimulus, in addition to the monetary stimulus provided by the European Central Bank over the past 4 months is keeping the Euro well supported.
There is no high impacting Eurozone data due for release today, investors will now look ahead to consumer confidence data due for release on Thursday.
The safe haven US Dollar is trading on the back foot across the board as risk appetite lifts. The mood in the market has improved not only on the back of additional EU stimulus but also following an encouraging report on Oxford University and AstraZeneca’s vaccine candidate. The report in Medical Journal The Lancet said that 100% of those who received the jab produced an immune response that lasts for at least two months and crucially there were no adverse side effects.
US Senators are also discussing another tranche of stimulus to boost the US economy. The discussions come as California’s new daily coronavirus cases reach 12,000 the highest since the pandemic started. Parts of the state have re-impose lockdown restrictions. Investors fear that US economic data which had been improving steadily since March / April lows will start deteriorating once again.
