Deal Finally Done
European assets have traded higher this week in response to news that EU leaders have finally agreed a deal for emergency funding. The deal, which comes on the back of four days and nights of negotiations, will provide a historic 1.8 trillion EUR in aid. As part of the funding agreed, the EU will create a 750 billion EUR coronavirus fund which will be distributed via a mix of loans and grants to the economies hardest hit by the virus. This fund will be in addition to the 1 trillion EU budget, for the next seven years, which had been in discussion before the pandemic materialised.
Negotiations had been tense and risks of the talks failing appeared to have increased over recent weeks as nations such as the Netherlands and Denmark opposed the deal initially. The Dutch PM was adamant that any funding granting should be in the form of loans, to be repaid, not in grants, to avoid saddling EU nations with debt. Within the 750 billion EUR of emergency funding, France and Germany wanted the level of grants to be at 500 billion EUR, however, in an effort to agree a compromise with the Netherlands and other nations within the frugal four, this figure was brought down to 390 billion.
EU Leaders Praise Extraordinary Efforts
Commenting on the deal agreed this week, French PM Emmanuel Macron was clearly proud of the work done by the 27 EU leaders saying: “There are 27 of us around the table and we managed to come up with a joint budget. What other political area in the world is capable of that? None other.” Macron went on to say “We have created a possibility of taking up loans together, of setting up a recovery fund in the spirit of solidarity… “The consequences will be historic.”
There were fears that should talks fail, the integrity of the eurozone could be in question. However, in the wake of this historic deal, supporters of the EU have been further endorsed. Commenting on the deal, German chancellor Angela Merkel echoed the comments of the French PM saying: “Extraordinary events, and this is the pandemic that has reached us all, also require extraordinary new methods.” The success of this deal is particularly noteworthy considering that each of the 27 members has the right to veto the deal and will come as an overwhelming relief for the nations whose economies have been decimated by the virus.
EURJPY (Bullish above 122.67)
From a technical viewpoint. EURJPY is once gain testing the 122.67 level resistance. With price still holding well above the 50 dma, the near term bias remains bullish with the 124.36 level the next upside objective for bulls. Should price fail here, bulls will be looking to defend the 119.38 level support. Only a break back beneath this level will significantly alter the medium term view that EURJPY will continue to trade higher, with the 119.38 looking to be the first corrective low of a new bull phase.
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