By Peter Nurse
The euro rose Monday, posting the highest level in four months against the u.s. dollar, as traders reacted with optimism to the noises that have emanated from the summit of the EU with regard to a potential agreement on a stimulus funding, massive for the region.
At 09.40 am, EUR/USD gained 0.2% to 1,1443, after having reached the highest level in four months 1,1467, while EUR/GBP rose 0.3% to 0,9118.
After three days of discussions, leaders of the european Union have yet to agree on how to structure the stimulus funds proposed, which amounts to 750 billion euros, and on the conditions to impose on the country, mainly around the mediterranean, who would benefit from it.
That said, they have agreed to come back on Monday afternoon to try to conclude the negotiations, which suggests that the two parties are not too far apart from one another.
“The difficult negotiations have just ended”, said the austrian chancellor Sebastian Kurz in a tweet last Monday. “We can be very happy with the result today. It will continue this afternoon”.
Austria is one of the four governments of the european Union, with the netherlands, Denmark and Sweden, which have delayed the negotiations on the agreement, concerned about the level of control over how the funds will be used.
Bloomberg said on Monday that those four governments are now satisfied that 390 billion euros of funds should be made available in the form of grants, the remainder being loans at low interest rates, a key element of the agreement.
“If this is true, then it is a deal pretty decent which is past. The hardliners need to understand that subsidies are necessary if they want a euro that works well. Transfer money standing to the North towards the South will be necessary,” said Andreas Steno Larsen, global head of strategies and currency exchange rates in Nordea, in a tweet.
Index ICE (NYSE:ICE) of the dollar, which tracks the greenback against a basket of six other currencies, remained stable at 95,925, close to the lowest level in four months that he has achieved in the past week. GBP/USD fell 0.1% to 1,2553, while USD/JPY rose 0.3% to 107,27.
The dollar has not been able to record gains despite the fact that the number of infections with the coronavirus, has exceeded the $ 14.5 million, with more than 600 000 deaths worldwide, according to data from the Johns Hopkins university.
The virus has made more than 140 000 victims in the United States in total. Florida has announced more than 12,000 new cases on Sunday, while the mayor of Los Angeles said his city was on the eve of new measures of containment.
These figures will put pressure on us policy makers to agree on new measures to stimulate the country’s economy, all the more that some of the policies scheduled to expire at the end of the month of July.
“We are seeing a political pressure increased on the republicans to compromise on the goals of the democrats, because the republicans are far behind in the polls… The Senate republicans are not able to slow the recovery,” said Reuters, citing Steven Englander, head of global strategy of foreign exchange at Standard Chartered (OTC:SCBFF) Bank in New York.