Global stocks and silver spike after EU recovery fund deal

Global stocks and the euro rose after European Union leaders reached a €750 billion recovery fund deal after four days of intensive negotiations. The agreed deal will see the European Commission raise these funds in the debt market and distribute €390 billion to countries in the form of grants. Countries will then get the remaining funds in the form of low-interest rate loans. European stocks rose because investors believe that the deal will help provide the much-needed stimulus package. The DAX index rose by 1.75% while the Stoxx 50 index rose by 1.50%.

Silver and other precious metals rose today, continuing the rally started in March this year. Silver price rose mostly because of the European recovery fund deal, positive statements by analysts, and the ongoing developments on the coronavirus vaccine. As an industrial metal, investors believe that its demand will continue to rise as the economy recovers. The recovery deal and the positive vaccine news will help push it higher, according to analysts. In a statement today, analysts at Morgan Stanley also cited its cheaper valuation than gold. They wrote:

“Silver will continue to be pulled higher by the strong gold price and supportive financial conditions. As real demand also recovers through the second half of the year, this will add further impetus to silver’s price, narrowing the gold-silver price ratio slightly.”

The Canadian dollar jumped against the US dollar as traders reacted to the upbeat retail sales numbers from Canada. According to Statistics Canada, the country’s retail sales rose by 18.7% in May as the country continued to reopen. This was lower than the 20% that traders were expecting. The core retail sales number rose by 10.6%, which was higher than the previous decline of 22%. Meanwhile, data showed that the new housing price index rose by 0.1% during the month.

EUR/USD

The EUR/USD pair wavered today as traders processed the recovery fund news. It is trading at 1.1440, which is slightly below the intraday high of 1.1470. On the four-hour chart, the price is above the 50-day and 100-day exponential moving averages. The RSI is slightly below the overbought level while the Average True Range (ATR) has dropped. Therefore, the pair is likely to continue rising as bulls target the next resistance at 1.1500.

GBP/USD

The GBP/USD pair rose to an intraday high of 1.2710, which is the highest it has been since June 11. On the four-hour chart, the price is above the 50-day and 100-day EMA while the RSI has moved close to the overbought level of 70. It is also above the 23.6% Fibonacci retracement level. Similarly, the moving average of oscillator has continued to rise. Therefore, the momentum could continue as traders test the next resistance at 1.2750.

XAG/USD

The XAG/USD pair jumped to 21, as momentum continued to build in the silver market. The pair is trading above all short and medium-term moving averages while the RSI has moved to the highest level since August last year. Similarly, the signal and histogram of the MACD has continued to move upwards. Therefore, while the price is likely to continue rising, it is possible that a short-term pullback will happen.