Market movers today

With a final deal struck on the EU budget and the recovery package, investors are likely to scrutinise the package to look for the finer details such as the resulting distribution and the share of loans versus grants among member states. Although an agreement has been reached, we do not expect any major moves as the price action yesterday suggested that a lot has already been priced in. 

Developments in the number of new COVID-19 cases remains a mixed picture with the US still seeing a high number of new infections, although, for example, things are brightening up in Arizona. Equity markets, however, do not seem to care much. An explanation for the latter may be that investors no longer expect a sharp rise in new cases to be followed by nationwide lockdowns and that a few companies have put forward positive initial vaccine test results increasing the probability that a final product can be ready in the beginning of next year. 

Selected market news

Last night, after four days of negotiations in Brussels, the 27 heads of state/government constituting the EU Council struck a deal on the Multiannual Financial Framework (EU's budget) for the years 2021-2027 totalling EUR1,000bn as well as a temporary expansion of the budget for the years 2021-2024 ('Next Generation EU'), where grants will make up EUR390bn of the entire package totalling EUR750bn (corresponding to EUR200bn through the Recovery and Resilience Facility). Yesterday morning it was reported that the 'frugal countries' would accept a final compromise if the amount of grants made up no more than EUR390bn and yesterday evening EU Council President Charles Michel came forward with a new proposal entailing exactly such a split of grants versus loans. The proposal included efforts to bridge the gap between demands from especially Dutch Premier Mark Rutte, namely that the funds must be intended for long-term structural improvements of the affected economies, and the Southern European countries having voiced concern that such demands could risk introducing a slow-moving bureaucratic process, implying a delay of the funds reaching the real economy. The incentives of the 'frugal countries' to agree to a deal was further increased by the proposal containing rebates for said countries plus Germany totalling EUR52.8bn under the new seven-year budget. With a deal now in place the final distribution among member states becomes key for markets. Italy is, according to Bloomberg, likely to receive grants worth EUR82bn, which is actually in line with our expectations under the initial proposal back in May before the watering down of the share of grants had started (see Next Generation EU: A landmark for European history?, 27 May), and should be seen as positive. The EU parliament is expected to ratify the deal later this week.   

Updated ECB PEPP holdings showed that the ECB last week increased its (gross) holdings by EUR20.5bn corresponding to EUR4.1bn of daily average purchases. This is in line with a purchase rate implying end-June 2021 holdings worth EUR1,350bn, which corresponds to the size of the current PEPP envelope.

 

Read the full article

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD consolidating at lows after mixed US data, Powell

EUR/USD trades near a fresh two-month low of 1.1671 after mixed US Markit PMIs, which anyway indicated economic expansion. Fed speakers highlighted the need for more fiscal stimulus.

EUR/USD News

GBP/USD holds on to daily gains amid Brexit’s optimism

The GBP/USD pair consolidates around 1.2750, underpinned by EU Chief Brexit Negotiator Barnier's optimism on a post-Brexit trade deal. UK Business activity remains in expansion territory according to Markit.

GBP/USD News

Gold: Elliott Wave downside targets point to the $1767 area

The commodities complex is taking another hit on Wednesday after a tough start to the week. The recent persistent greenback strength has been a thorn in the side of the precious metal since the dollar consolidation began.

Gold News

In search of the Bitcoin anchorage

When the gates of heaven seemed to open, with the moon clearer than ever, selling came back to the crypto board. After the long winter of 2018/2019, hope was already exhausted, and the current setback is finishing with its remains. 

Read more

WTI flirts with the 200-day SMA below $40.00/bbl ahead of EIA

Prices of the WTI are alternating gains with losses below the key $40.00 mark per barrel on Wednesday.

Oil News

Forex Majors

Cryptocurrencies

Signatures