The European currency remains under the control of buyers, as the data on activity in the eurozone services sector released today pleased traders. The news that French Finance Minister Bruno Le Maire again raised the issue of the distribution of the EU stabilization fund also supported the euro.
EU stabilization fund
During the interview, Le Maire said that the European Union's plan to allocate 750 billion euros ($890 billion) is on the wrong track and that he is deeply concerned about the slow implementation of this initiative, which was agreed in July last year, after which everything ended. Le Maire believes that the bloc needs to distribute these funds, which will help a more active economic recovery after the fight against the coronavirus pandemic. "If we want a strong economy, we need to invest and invest right now," Le Maire said.
The statements of the French Finance Minister about the slow implementation of the recovery fund have a direct connection with the fact that no one denies: Europe continues to lag more and more behind the United States in terms of economic growth after the coronavirus pandemic. Another $ 1.9 trillion aid package implemented by President Joe Biden is already yielding results, which is reflected in the pace of the US recovery, inflation, and the labor market. This makes the gap with Europe even wider. Let me remind you that just recently, several representatives of the European Central Bank also shared their concerns about the delays in the implementation of the EU recovery fund. It was not without the participation of President Emmanuel Macron, who called on EU leaders to return to the consideration of the implementation of the plan at the next virtual summit.
Germany may tighten quarantine over COVID-19
Today, there was news that the German government is still considering the option of the short-term introduction of quarantine measures due to the high level of coronavirus infection. However, due to the upcoming national elections, politicians are reluctant to take this step and resort to introducing new restrictions. Merkel's latest attempt to return to social distancing measures led to a sharp public outrage, as a result of which the chancellor was forced to back down. While some federal states and municipalities are allowing businesses to resume operations, other hardest-hit areas are tightening policies. For example, a curfew has been imposed in Hamburg and other cities since the Easter weekend.
Now, as for the indicators that helped the European currency to stay afloat today. According to the final data from IHS Markit, the composite PMI index rose to 53.2 points in March from 48.8 points in February. The data was higher than the forecasts of economists, who had expected a figure of 52.5 points. The final index of managers for the service sector pulled up to 50 points and amounted to 49.6 points against 45.7 points in February. The report says that the European economy has endured the recent lockdowns much better than many expected. The growth was due to renewed production, and social distancing measures and restrictions imposed had a much smaller impact on the service sector enterprises than last time. The growth leader was Germany, where a resurgent manufacturing economy contributed to the best overall performance. The index of business activity in the service sector increased from 45.7 to 51.5 points. The index of business activity in the service sector of France was 48.2 points against 45.6 points.
As for the technical picture of the EURUSD pair, it remained unchanged compared to the morning forecast. The focus of buyers of risky assets is focused on the breakout of the resistance of 1.1895. Only with this development can we expect the euro to continue to grow to new local highs in the area of 1.1930 and 1.1990. It is also important for buyers to protect the support of 1.1850. In the afternoon, we will publish the minutes of the US Federal Reserve meeting, as well as a meeting of the G20 and the International Monetary Fund. The news may be positively received by the market, which will lead to the continued growth of risky assets.
The British pound is experiencing problems, and this may be due to problems around the AstraZeneca vaccine. About 18 million adults in the UK have received the AstraZeneca vaccine. So far, 30 rare cases of blood clotting and seven deaths have been reported. However, experts note that for elderly or clinically vulnerable people, who are much more likely to become seriously ill or die from the coronavirus, the benefits of the shot outweigh the very small risk of blood clots. The Medicines and Healthcare Products Regulatory Agency (MHRA) and the European Medicines Agency (EMA) are expected to provide an update on their research on whether the Oxford/AstraZeneca vaccine causes rare blood clots in the brain. They may recommend suspending the distribution of the vaccine to younger people if a link to blood clots is established.
Today's data on the UK services sector provided only temporary support to the pound. The IHS Markit report said that as a result of increased activity on the back of increased new orders and employment growth, the final PMI index increased significantly in March. The purchasing managers' index for the services sector was 56.3 points compared to 49.5 points in February. The latest data shows the highest rate of recovery in production in the last seven months. Respondents attributed the increase in activity to a recovery in business and consumer spending. The composite PMI also rose to 56.4 points in March from 49.6 points in February. Economists had expected an increase to 56.6 points.
As for the technical picture of the GBPUSD pair, the breakout of the important support of 1.3812, which kept the trading instrument from resuming the bear market, hit the stop orders of buyers. This led to an instant movement of the pound down, which is now aimed at new major local lows in the area of 1.3718. A breakout of this range will easily open a direct road to the area of 1.3695. It will be possible to talk about an upward correction of the pair only after the bulls manage to achieve a return to the resistance of 1.3775, from which access to the highs of 1.3835 and 1.3880 will open.