Giles Coghlan LLB, Lth, MA
Financial Source
If agreed, how will the European Recovery fund impact the EUR/USD?
The European Recovery Fund is a €750 billion post COVID-19 fund designed to support the eurozone. This will be alongside the already proposed €1.3+ trillion PEPP program However, not all the nations are in agreement with the Recovery Fund’s terms as they are against grants being given out and would prefer loans. These nations who are deemed as being most at risk of rejecting the proposed fund are Austria, Denmark, Sweden, and the Netherlands. They are known as the ‘frugal four’ and have the potential to de-rail the proposed fund and sink the Euro. The FT had an interesting piece recently on how Angela Merkel might be able to persuade the so-called ‘frugal four’ to stay on board with the European Recovery fund.
How Merkel can persuade the frugal four?
According to the Financial Times, Ms. Merkel is able to make some headway in appeasing the frugal four by saying that EU countries must show a willingness to reform their economies and ‘future proof’ them. In essence, it is a way of adding strings to the receipt of the recovery fund. You can read the full article here (it may be gated). Ms. Merkel will seek a compromise in order to support weaker economies in the zone like Spain and Italy, but also without unduly alarming the frugal four.
What’s the impact on the EUR/USD?
If the Recovery Fund is able to be finally agreed, and the frugal four are satisfied enough to support it, then the EURUSD will be supported. Any return to 1.1030 would be considered good value for EURUSD buyers, especially as US COVID-19 cases are rising more and more. The US economy looks like slipping behind the Eurozone economy the longer this US case count keeps rising.
However, if the Recovery Fund is rejected this will surprise the market so expect a sudden and sharp drop in the EURUSD on that news.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
U.S. Pres. Trump expected to announce reciprocal tariffs –LIVE
U.S. President Donald Trump is set to unveil the details of his reciprocal tariffs on what he dubs "Liberation Day." Markets are on high alert, bracing for increased volatility amid growing concerns that these tariffs could negatively impact both economic growth and inflation prospects.
EUR/USD looks to retest 1.0900
EUR/USD surged to multi-day highs in response to further selling pressure on the Greenback and news that the EU could be planning measures to alleviate Trump’s tariffs.
Gold looks consolidative near $3,120 ahead of Trump's “Liberation Day”
Gold is regaining momentum, climbing above $3,120 after a slight pullback from Tuesday’s near-record high of $3,150. Retreating US yields are bolstering XAU/USD, ahead of President Trump's official announcement of the reciprocal tariff measures later this Wednesday.
Grayscale launches Bitcoin options ETF with a focus on income generation
In a press release on Wednesday, Grayscale announced the launch of Bitcoin options-based ETFs, the Grayscale Bitcoin Covered Call ETF (BTCC) and Grayscale Bitcoin Premium Income ETF (BPI).
Is the US economy headed for a recession?
Leading economists say a recession is more likely than originally expected. With new tariffs set to be launched on April 2, investors and economists are growing more concerned about an economic slowdown or recession.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.