European stocks rise on optimism of recovery fund
European stocks rose today as investors focused on the ongoing Eurogroup meeting. In Germany, the DAX index rose by almost 1% while in France, the CAC 40 index rose by 1.32%. The biggest mover in Europe was Wirecard, the embattled payment company. Its shares dropped by more than 40% today as investors reacted to news that a Philippine bank had blamed a “rogue” employee for the missing funds worth almost 2 billion euros. As a result, the company’s CEO, who is also the founder resigned to pave the way for an investigation. Meanwhile, Angela Merkel persuaded her colleagues to pass the proposed $826 billion recovery fund as soon as possible.
The British pound dropped today even after the ONS released positive retail sales numbers. According to the office, the headline retail sales rebounded by 12% in May after tumbling by 18% in the previous month. Core retail sales, which exclude the volatile food and energy products, increased by 10.2% after falling by 15% in the previous month. These numbers came a day after the Bank of England released its interest rate decision. In the subsequent interview, Governor Bailey reiterated that the bank would consider negative rates if the economy continued to weaken.
The euro was little changed as traders continued to wait for the Eurogroup meeting. They also reacted to the German Producer Price Index (PPI) data. According to Destatis, the country’s factory gate prices declined by 0.4% in May after falling by 0.7% in the previous month. The prices declined by 2.2% on a year-on-year basis. They also reacted to the April current account numbers released by the ECB. The data showed that the current account declined from the previous 27.4 billion euros to 14.4 billion euros. Meanwhile, in Australia, retail sales jumped by 16.3% in May, the fastest pace in decades.
The GBP/USD pair declined to an intraday low of 1.2368, which was the lowest level since the first week of this month. Prior to the decline, the pair had formed a bearish pennant during the morning session. As it dropped, it moved below the neckline of the previous head and shoulder pattern. At the same time, the price is below the medium and longer-term moving averages. This means that the price may continue falling as bears attempt to test the next support at 1.2300.
The EUR/USD pair was little changed today as traders waited for the outcome of the Eurogroup meeting. On the four-hour chart, the price is trading at 1.1210, which is along the neckline of the head and shoulders pattern. Interestingly, as with the GBP/USD pair, the EUR/USD is forming a bearish pennant/flag pattern. This means that it is likely to breakout lower as bears attempt to push it below 1.1200.
The EUR/GBP pair rose to an intraday high of 0.9060, which is the highest it has been since March 27. On the daily chart, the price is above the 50-day and 100-day EMA. It is also above the 61.8% retracement level while the RSI has pointed higher. Bypassing the important resistance at 0.9050, it means that bulls are now in control, which means that the price may continue rising.