Via Financial Times,
The FT had an interesting piece recently on how Angela Merkel might persuade the so called 'frugal four' to back the European Recovery fund. For those unaware of this issue it is to do with ratifying the German- Franco European Recovery Fund. This fund is a €750 billion post COVID-19 recovery fund designed to support the zone. However, not all the nations are in agreement with the proposed fund. This is where the 'frugal four' enter. They are opposed to the idea of the fund involving grants to some of the most struggling nations like Italy. Instead they would favour loans. These nations who are deemed as being most at risk of rejecting the proposed fund are Austria, Denmark, Sweden and the Netherlands.
How Merkel can get the frugal four on board.
According to the Financial Times Ms Merkel is going some way to appease the frugal four who would like to see strings attached to the recovery fund. She is doing this by saying that EU countries must show willingness to reform their economies and 'future proof' them. You can read the full article here. (it may be gated).
How will the recovery fund impact the EURUSD?
If the Recovery Fund is finally agreed and the frugal four are appeased enough to support it then the EURUSD will be supported. Any return to 1.1030 would be considered good value for EURUSD buyers, especially as US COVID-19 cases are rising more and more. The US economy looks like slipping behind the Eurozone economy.
If the Recovery Fund is rejected then expect sudden and sharp EURUSD sellers for a swift move lower.
