Markets hope that the conflict about the Recovery Fund will be overcome (future growth of EUR/USD and GBP/USD pairs is expected)

On Wednesday, the attention of the market shifted from the impact of the coronavirus pandemic on the positive aspects associated with the recovery of the global economy.

If the US stock market somewhat revived on Wednesday, despite the increase in the number of cases in America, Europe has remained in the negative zone in the wake of skepticism about the success of the agreements on the European Recovery Fund. The meeting is expected to take place on July 18.

The existing conflict between countries regarding the issue of operation of this Fund shows that the existing contradictions may simply not allow this idea to be implemented or it will only be partially implemented, which, of course, will be a negativity for the ability of the most affected countries to rise economically from COVID-19. Judging by the statements of various European officials, the tension is only growing. Thus, Lagarde, the ECB President, lowered expectations of a successful agreement by expressing concern and lack of consensus among interested parties.

There has been a process of consolidation of major currencies paired with the dollar in the currency market for the last month. The outbreak of the COVID-19 pandemic in the United States, Brexit's problems in relations between the EU and Great Britain, as well as the continuation of the recovery process of the economies leading from this point of view of the countries. Now, the high probability of the failure of the EU summit to confirm the work of the Recovery Fund, in addition to the multi-directional forces that have been consolidating recently, may again return the main currency pairs to a sideways trend, interrupting the probability of certain trends forming.

The uncertainty factor seems to continue to reign in the markets in the near future. Only the news about the beginning of a really working coronavirus vaccine can radically change the situation. In this case, the balance will begin to tilt towards the factor of restoring economic activity in the world,which will be the strongest signal of the start of a global perspective weakening of the US dollar. In this case, all the reasons that play against it will start to work: the most powerful stimulus programs from the Federal Reserve and the US Treasury, the fall in general interest in the dollar as a safe haven currency, as well as the resumption of demand for company shares.

We believe that during the current month, the current overall market picture will continue with possible local shots of the dollar up or down, primarily on the wave of information leads, and not economic statistics.

Forecast of the day:

The EUR/USD pair broke out of the range 1.1165-1.1350. Investors hope that the issue about the Recovery Fund at the EU summit will still end positively. Price consolidating above the level of 1.1350 will allow it to continue to grow first to 1.1420 and then to 1.1500.

The GBP/USD pair broke out of the range 1.21345-1.2540, thereby opening the way to the levels of 1.2690 and 1.2800.

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The material has been provided by InstaForex Company - www.instaforex.com