The fourth day of talks began in Brussels, where EU leaders are trying to reach a compromise and approve a rescue plan for the economy. Meanwhile, the exchange rate of the main currency pair EUR/USD set a four-month high in the morning, above 1.1460.
Although European leaders did not reach an agreement over the weekend, they do not give up on further negotiations. This is a positive signal. Maybe they can approve the plan this afternoon. According to the media, this is the longest-running EU summit in 20 years, and the dispute is broken down by the number of subsidies for the countries most affected by the economic consequences of the epidemic. The original proposal was €400 billion, but four countries did not agree with this: The Netherlands, Australia, Sweden, and Denmark. They proposed EUR 350 billion. Meanwhile, the President of the European Council, Charles Michel, proposed a new grant of €390 billion. According to Bloomberg, these four countries can agree to this amount of aid, which could result in the approval of a rescue plan. Talks will resume at 16:00 CET (Central European Time).
While the euro seems to react positively to the current events, the stock exchange indices seem to perceive the disagreement as negative. The German DAX is losing slightly by turning back from a potential resistance that may be located in the area of the high from the first week of June at 12974 points. It seems that setting the amount of the recovery fund is very much needed by the German economy, and all Angela Merkel's political power is focused on making sure that the plan is already set during the summit. Germany is Europe's largest economy and could also benefit significantly from the European economic recovery plan.
For the first time in six days, expected volatility in one month has increased in the currency options market, specifically the USD/JPY options. On the other hand, for 3-month options, the implied volatility increased for the first time in three days. This may mean that investors expect a slightly higher USD/JPY volatility on these dates, which remains in consolidation between JPY 106 and 108.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
