By Peter Nurse
Investing.com – The euro has continued to show strength in early European trade Thursday, as traders continue to upside in the single currency following the announcement of a hefty plan to prop up the bloc’s virus-hit economies.
At 3:05 AM ET (0705 GMT), EUR/USD traded 0.1% higher at 1.1013, remaining above the 1.10 level, after earlier rising to an eight-week peak of $1.1035.
This follows the EU Commission announcing its plan for a European recovery fund Wednesday, with the proposal exceeding market expectations as it envisages 250 billion euros in loans on top of the 500 billion euros in grants, which were originally proposed by France and Germany last week.
The blueprint, if ratified by all, would be a step towards mutualized debt as a major funding tool for the first time, paving the way for greater EU powers of taxation.
“Overall, we believe the recovery fund proposal is a strong signal from the Commission and European leaders (if confirmed) of support for the European project,” said analysts at Danske Bank, in a note to clients.
Losses to the safe-haven greenback came despite tensions between China and the U.S. being stretched even more, after Secretary of State Mike Pompeo said that the Trump administration could no longer certify Hong Kong’s political autonomy from China under the new national security law.
This could open the door to options including visa restrictions, asset freezes and potential tariffs.
That said, U.S. business groups have urged President Donald Trump to go slowly in responding to Beijing’s planned imposition of new national security laws on Hong Kong.
At 3:05 AM ET, the yuan, often seen as a barometer of relations between the world’s two biggest economies, gained 0.2% to 7.1556 per dollar.
Another currency showing strength Thursday is sterling, after the U.K. government announced plans late Wednesday for its test and trace system to combat the coronavirus outbreak.
The aim of the system is to lift national lockdown restrictions and move towards more localised, targeted measures.
At 03:05, GBP/USD rose 0.2% to 1.2270.
Forex – Euro Buoyed by Recovery Fund Plan
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