|Day's range||1.13 - 1.13|
|52-week range||1.0655 - 1.1496|
(Bloomberg) -- For all its flaws, the euro zone’s gravitational pull is proving hard to resist.Croatia and Bulgaria became the latest countries to inch closer to the bloc when they got the green light on Friday to enter the so-called waiting room to join the single currency. They would be the 20th and 21st members; Romania, another former communist state, hopes to be the 22nd.Less than a quarter of century since it was created, the euro area has been repeatedly buffeted by financial meltdowns that could have easily shattered the entire project.Yet those episodes also spurred governments to allow the European Central Bank to boost its powers in an effort to keep the bloc together. That’s proved to be a strong-enough argument for some that a shared currency -- which all European Union members are technically supposed to adopt, though Denmark has an opt-out and others have resisted -- still holds appeal.“It’s a tremendous vote of confidence in the EU and the euro if more countries want to join -- it’s a confidence booster,” said Gilles Moec, chief economist at AXA SA. “It may be a bit of a headache for the central bank, but expanding the euro area should boost its credibility as a currency for the entire EU.”Croatia and Bulgaria will now spend at least two years with their currencies pegged to the euro before they can become full members.When they do, they’ll gain full access to the massive financial backstop of the ECB, which has repeatedly stepped in to calm crises. As the coronavirus pandemic hit Europe, it announced a highly flexible bond-buying program specifically to keep down government borrowing costs in stressed economies such as Italy’s.They’ll also adopt the world’s second-biggest reserve currency, replacing a Croatian kuna and Bulgarian lev that never fully won public trust. Close to 80% of savings in Croatia are in euros, and at an event last year to mark the 25th anniversary of the kuna, central bank Governor Boris Vujcic said he hoped it would never reach its 30th.The nations are essentially pursuing a policy of being stronger inside a club, and choosing to look west in doing so, as other eastern European nations did before them.Slovenia was first to join in 2007. Slovakia grappled with currency instability before it entered in 2009. The Baltic republics of Estonia, Latvia and Lithuania, after massive economic meltdowns during the global financial crisis, joined from 2011 to 2015 in part due to geopolitical concerns related to their proximity to Russia.Croatia and Bulgaria are two of the EU’s poorest members, and both rely heavily on foreign tourism that has been crushed by the pandemic. They’ve already turned to the ECB to set up swap lines to access euros.“First and foremost, it’s a part of a political process,” said Simon Quijano-Evans, chief economist at Gemcorp Capital LLP in London. “But it makes complete economic sense as well.”Convergence ConundrumStill, membership has its risks. The loss of control over exchange rates means that euro members can’t devalue their way out of a crisis. Instead, they could be forced into a damaging spiral of falling prices and wages, as happened for southern European economies in the euro zone’s sovereign debt crisis.There is little sign that euro-zone membership alone drives a convergence in living standards. Italy has yet to regain the level of economic output from 2007, before the last financial crisis. That’s one reason why enthusiasm for the currency isn’t universal.Poland, the largest EU economy outside the bloc, says it won’t consider dumping the zloty until Polish living standards are equal to those in western Europe. Hungary’s central bank wants stronger membership criteria, including higher productivity, a more mature financial system and a close alignment of economic cycles. Czech Prime Minister Andrej Babis has repeatedly said he doesn’t want to help bail out struggling nations like Italy.The ECB’s own progress report published last month showed that Bulgaria and Croatia still have plenty of work to do before they can join the euro, especially on inflation and the health of public finances. Concerns have also been raised over whether Bulgaria has adequately fought corruption and money laundering, after financial crimes hit the region in recent years.For the central bank in Frankfurt, the new entrants raise the prospect that it’ll one day be called on yet again to step into prevent a localized financial crisis from spreading to the rest of the bloc. They may have tiny economies, but Greece still came close to splintering the currency union in 2015 despite accounting for less than 2% of euro-zone GDP.For Croatia and Bulgaria, better that than the alternative.“This crisis showed us that those that are in the euro zone and its waiting room will have access to billions of euros for recovery,” said Bulgarian Prime Minister Boyko Borissov. “Those who aren’t will take on debt, and with huge interest.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The Euro initially rally during the week, pulled back from the 200 week EMA, and then rallied again to close out a choppy week. This is normal for this pair.
The Euro continues to be very choppy during the Friday session as markets have nowhere to be. At this point, it appears that we are stuck in consolidation.
The direction of the EUR/USD the rest of the session on Friday is likely to be determined by trader reaction to the main 50% level at 1.1295.
EUR/USD briefly traded at a fresh 4-week high yesterday before sellers stepped in to hold the currency pair within its broader range.
Bulgaria and Croatia have entered the euro area’s waiting room, joining the Exchange Rate Mechanism II, a system for managing exchange rate fluctuations and smoothing the path of entry into the single currency. The decision was confirmed on Friday by euro area finance ministers, the European Central Bank, and Denmark, a longstanding ERM-2 member, after official convergence reports indicated that both countries' economies were sufficiently in synch with the euro area's. Christine Lagarde, the ECB's president, said that Bulgaria and Croatia had taken “a big step today on the path towards joining the euro area”.
U.S. stocks are set to open lower Friday, amid continuing concerns about the growth of coronavirus cases and its impact on the prospects for economic recovery ahead of the upcoming earnings season. At 7:10 AM ET (1110 GMT), S&P 500 Futures traded 5 points, or 0.2%, lower, Nasdaq Futures down 5 points, or 0.1%. The Dow Futures contract fell 55 points, or 0.2%.
The direction of the EUR/USD the rest of the session is likely to be determined by trader reaction to the 50% level at 1.1278.
"The question is whether Fitch decides to be tough and downgrade Italy. We expect that it will remain on hold given that the ECB and EU are showing strong support for Italy through QE and the expected recovery fund," said Danske Bank.
The Euro shot higher yet again on Thursday but continues to find plenty of resistance above in what has been difficult trading as of late.
(Bloomberg) -- Regardless of what the spread of the coronavirus does to demand for risk, market indicators suggest the euro will rise.The common currency is inching toward a close above its 200-week average for the first time in a year. A convincing break would be the latest in a string of signals from traders that the momentum behind the euro’s third monthly advance -- for the first time in more than two years -- is growing.What’s driving the rally is optimism over the European Union’s handling of the virus, including talks of a joint recovery fund, and governments’ relatively swift implementations of lockdowns. That stands in contrast to the pandemic response from across the Atlantic.The euro area’s recession as a result of those lockdowns probably won’t be as deep as previously feared, according to some European policy makers. Meanwhile, with the virus spreading across the U.S., which took time to implement lockdowns, Federal Reserve Bank of Atlanta President Raphael Bostic suggested that economic activity in parts of the country is showing signs of leveling off.This divergence in views from policy makers in the U.S. and EU, together with central banks worldwide backstopping financial markets with unprecedented stimulus, has weighed on Bloomberg’s dollar index.The gauge has fallen three straight months, the longest such run in more than a year. It measures the greenback against a basket of currencies, of which the euro accounts for about a third.Betting that the euro will gain over the next six months against the dollar now comes at a premium, as shown by so-called risk reversal options. While these signaled bearish sentiment on the common currency in recent months, this week they turned the most positive since March.The SignsA close above its 200-weekly moving average would be the euro’s first in a year. Should it surpass a key resistance level at the June 10 high of $1.1422, it will be trading at the highest in four months.Propelling the euro forward is the strongest bullish sentiment since 2018, with bulls taking over the price action for six straight weeks, the longest streak this year, according to Bloomberg’s Fear/Greed indicator.Bloomberg’s option probability calculator shows the common currency is 50% more likely to trade above $1.15 in a week’s time than to drop below $1.12.NOTE: Vassilis Karamanis is an FX and rates strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment adviceFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
EUR/USD rallied to fresh highs not seen since early June in Asian trading but has since pared back some of its gains.
Daily forecast and trading signals of forex majors, commodities, cryptocurrencies and indices.
EUR/USD is bullish and we might see 1.1410 hit. However, the pair is sitting at important resistance.
European stock markets traded higher Thursday, with healthy results from software giant SAP (DE:SAPG) pointing to an economic recovery but investors remain wary of the mounting coronavirus cases ahead of the new earnings season. Helping the German index outperform Thursday were strong gains from SAP, up 7.5% at a new all-time high, with the business software giant posting a rise of 8% in its second quarter operating profit, helped by a recovery in software license revenue in the Asia Pacific and Japan region. Elsewhere, fashion retailer boohoo.com (LON:BOOH) shares bounced sharply after its biggest shareholder, Jupiter Fund Management (LON:JUP), delivered a vote of confidence in the company by raising its stake to over 10%.
Elsewhere, the USD/CNY pair slid 0.2% to 6.9878. The yuan was boosted by better-than expected inflation data for June, with producer prices falling 3% year-on-year. The drop in the PPI was smaller compared with the previous month’s drop of 3.7% and the 3.2% drop analysts had generally forecast. However, the pair is being supported most by the rally in Chinese stocks, which continued for an eighth straight day on Thursday.
European stock markets are set to edge higher Thursday, with investors hopeful of more government help to sustain the economic recovery while remaining wary of the mounting coronavirus cases ahead of the new earnings season. At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% higher. CAC 40 futures in France were up 0.8%, while the FTSE 100 futures contract in the U.K. rose 0.6%.
It’s a relatively quiet day on the economic calendar. Expect the weekly jobless claims from the U.S, Brexit, and COVID-19 to draw attention.
Euro has rallied on Wednesday as we continue to dance around the 1.13 handle in general. The market probably finds plenty of reasons to go sideways yet again.
The direction of the EUR/USD on Wednesday is likely to be determined by trader reaction to the 50% levels at 1.1295 and 1.1265.
EUR/USD traded unchanged shortly after the European open and volatility may be subdued into North American trading.
Daily forecast and trading signals of forex majors, commodities, cryptocurrencies and indices.
The Euro has refused to buckle under the weight of lacklustre economic data and dire warnings of late.