Euro Treads Water as EU Policymakers Continue to Debate Economic Rescue Deal

James Hyerczyk
Published: Jul 20, 2020, 01:18 UTC

Diplomats said it was possible that they would abandon the summit and try again for an agreement next month.


The Euro showed signs of life earlier in the session, hovering near a four-month high against the U.S. Dollar on Monday as bullish investors held on to hopes that European Commission policymakers would break the stalemate and finally hammer out an economic rescue deal as their long-winded weekend summit reached a record length.

At 0:59 GMT, the EUR/USD is trading 1.1422, down 0.0004 or -0.03%.

Reuters is reporting that EU leaders were at an impasse over a proposed 750 billion Euro ($858.30 billion) recovery fund, which is supposed to be raised on behalf of them all on capital markets by the EU’s executive European Commission.

That would be a historic step towards greater fiscal integration for the union, but a group of “frugal” wealthy north European states were pushing for a smaller fund and seeking to limit how payouts are split between grants and repayable loans.

A source told Reuters $350 billion Euros on grants was the maximum acceptable for the camp of thrifty northerners, compared to 400 billion seen as the bare minimum by many others, including Germany and France.

Diplomats said it was possible that they would abandon the summit and try again for an agreement next month. But market players expect them to reach a deal in the future even if they fail to do so this time.

Deal Will Have Major Impact on Euro

While the outcome of the negotiations is still up in the air early Monday, most market players agree that an agreement or a collapse in the talks would have a major impact on the single currency when trading resumes.

Early Monday, the Euro is banging on a four-month high on hopes that Europe’s fiscal leaders would move toward agreement on the massive 750 billion-euro rescue fund. A positive outcome by the end of the EU summit, whenever that is, could potentially be the Euro’s ticket to fresh highs for the year.

Currently, the EUR/USD is trading 1.1422, just below last week’s 1.1452 high. Taking out this level could drive the Forex pair into the March 9, 2020 top at 1.1496, followed closely by the January 1, 2019 main top at 1.1514. The latter is a potential trigger point for an even steeper rally with some speculators setting their sights on 1.1570 and 1.1622, both former tops.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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