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EURUSD forecast for 19.05.2020

May 19, 2020

May 19, 2020

Euro: strength is in unity!Dmitri Demidenko

Europe starts acting in unity

Good news has come from Europe, and the US dollar weakens amid the S&P 500 rally. This sends the euro up. The [EUR/USD][1] has rallied up as Germany and France are willing to join efforts in the aid to the EU countries worst affected by Covid-19. Besides, the ECB is also willing to do its best to support the euro-area economies hit by the pandemic. Besides, the U.S. biotechnology company Moderna announced that its coronavirus vaccine shows early signs of the viral immune response. The favorable information environment allowed the US stocks to surge above the April corrective highs.

The EUR/USD bulls were held back by numerous negative factors. The euro- area countries couldn’t find a compromise on the fiscal stimulus, and the idea of corona-bonds failed. The German constitutional court issued an unexpected ruling that could limit the ECB abilities in assisting the euro-area economy. Also, the demand for the greenback as a safe-haven currency was high amid the expectations for the S&P 500 sell-offs. Once the negative was eased, the [EUR/USD][1] has started climbing up.

French President Emmanuel Macron and German Chancellor Angela Merkel offered a €500-billion European recovery fund to be distributed to the EU countries worst affected by the pandemic. Remarkably, the resources for the fund are planned to be formed by issuing bonds, which will be repaid gradually from the EU’s overall budget. Remember, a huge part of its costs is funded by Germany. Corona bonds seem to be adopted, although in a different form than it was originally thought. According to the German Chancellor, “the EU must act together, the nation state has no chance if it acts on its own”.

The euro has also been supported by Christine Lagarde, who expresses no concerns about either the QE associated with the pandemic or the quantitative easing program launched in 2015. The ECB sees no obstacles to achieving its goals, and each national bank in the euro area is independent and cannot receive instructions from the government. The European central bank seems to be unwilling to give any explanations to the German judges, it won’t stop providing support to the countries hit by the pandemic. It is especially acute for Italy, whose public debt, according to Bloomberg, could be out of control. As a result, Rome will have to restructure Italy’s debt.

Dynamics of Italy’s debt

![LiteForex: EURUSD forecast for 19.05.2020][2]

Source: Bloomberg

Positive news from Germany and France, together with the ECB clear position, strengthened the euro. The euro has been also supported by the news from the US. The US stocks are rising amid the information about coronavirus vaccine, and the report from South Korea that recovered coronavirus patients are not infectious. Jerome Powell announced the Fed is willing to hold the interest rates close to zero until the central bank is confident that the US economy has recovered. The [EUR/USD][1] has been up above the bottom of figure 9. Unless the US-China trade war resumes, the pair may well be rising to the top of the middle-term consolidation range 1.065-1.115.

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Price chart of EURUSD in real time mode

![Euro: strength is in unity!][5]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  2. cdn.liteforex.com/cache/uploads/blog_post/eurusd/debt-italy-19-05-20.jpg?w=30&s=405fa08b625c553bc31e846744515304
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  5. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-19-05-20.jpg?q=75&w=1000&s=d956655c5fde1afdc9448928e68d5bfb