Euro jumps after Macron and Merkel reach EU financing deal
The euro jumped today after Angela Merkel and Emmanuel Macron reached a funding deal for the region. The two leaders pledged to help mobilize more than $545 billion to help countries rebuild after the pandemic. The countries that will receive these funds will not be required to pay it back. Instead, the liability will be added to the EU budget. The new funding will need to be voted on by the rest of the 25 members of the bloc. The currency also rose after data from ZEW showed that economic sentiment was improving in Germany. The sentiment rose to 51.0 from the previous 28.2.
The British pound rose slightly after the UK released the post-Brexit tariff framework. The country said that it will cut import duties on most items worth more than $36 billion. Some of the items that will be exempt include copper alloy tubes and screws and bolts. The country will maintain tariffs on important agricultural and automobile products. In a statement, Liz Truss, the International Trade Secretary, said that the goal of the new arrangement will cut red tape and reduce the cost of everyday products. Still, the biggest challenge for the UK economy is the stalled Brexit talks.
US futures dropped today as the market waited for testimony from the Federal Reserve chair. Futures tied to the Dow Jones fell by 65 points while those tied to the S&P 500 dropped by 10 points. The biggest mover in the premarket was Walmart, whose shares rose by more than 4% after the company released positive earnings. The retailer made a net income of $3.99 billion from revenues of more than $134 billion. The revenue was higher than the consensus estimates of $123 billion. The company’s domestic same store sales rose by 11.3% while its e-commerce revenue doubled. The company will also shut down jet.com, a company it acquired three years ago for more than $3 billion.
The EUR/USD pair rose to an intraday high of 1.0976 partly due to the statement from Merkel and Macron. Another reason was the overall dollar weakness. On the hourly chart, the price is slightly above the 61.8% Fibonacci retracement level. It is also above the 50-day and 100-day exponential moving averages. The pair has also formed a bearish engulfing pattern, which implies that it might decline. If it does, the next level to watch will be the 61.8% retracement at 1.0920.
The USD/JPY pair rose to an intraday high of 107.80. This was the highest it has been since April 23. On the hourly chart, the price moved above the previous high of 107.76. Also, the price is above the 50-day and 100-day exponential moving averages while the RSI has soared to the overbought level of 70. While the pair may continue soaring, it is also possible for it to retrace as some bulls take profit.
The GBP/USD pair rose slightly to an intraday high of 1.2275. On the four-hour chart, the price is slightly below the 50% Fibonacci retracement level. It is slightly below the 50-day and 100-day exponential moving average while volatility, as measured by the Average True Range (ATR), has fallen. The pair may see some volatility in the near term as the market continues to watch the happenings on Brexit.