|The European Union announced an enormous EUR $750 Billion recovery plan. The European Commission announced this program as a ‘common debt’, which makes the debt the collective responsibility of all member nations, breaking from previously independent fiscal responsibility. This is significant break from the EU and ECB rules and makes fiscally strong nations (Germany, Holland, Austria) responsible for the hugely indebted nations such as Italy, Greece and Spain. It could open ‘Pandora’s Box’? The EUR attempts to regain 1.1000, while the GBP settled around 1.2250.|
Markets rallied on the European news, despite events in Hong Kong, which could threaten global trade. US Secretary of State, Mike Pompeo, declared that Hong Kong was no longer autonomous, under new Chinese legislation. Sanctions have been promised, while trade could be further disrupted, following the fallout from the coronavirus. The Federal Reserve released the latest ‘Beige Book’ which recognised big falls in economic activity in all districts, although there were many mentions of re-opening of the economy, as a silver lining. The threat to global trade did not assist the trade exposed commodity currencies, with the AUD drifting back to 0.6600, while the NZD fell back to 0.6170.
Global economies re-opening and the threat to global trade remain the big issues of the week.