• Joel

EUR Recovers Despite EU Flop & PMI Drop

EUR has been performing strongly today and is an outperformer in the G10 FX space, despite a recent string of bad business survey data and a seemingly disappointing outcome from the latest meeting of EU27 Leaders. 

EURUSD fell to lows of below 1.0740 overnight, but has been on the front foot since the early European morning and has, in recent trade, broken back above the 1.08 level, roughly the level it was at prior to the outcome of last night’s EU Summit being announced. 


Thursday Morning: Bad PMI Data

Eurozone PMIs fell to all-time lows across the board in April, representative of the devastation in the economy due to the Covid-19 outbreak. 


- Manufacturing came in at 33.6 (exp. 39.2)

- Services came in at 11.7 (exp 23.8)

- Composite came in at 13.5 (exp 25.7)

Thursday Evening: EU Summit 

Yesterday evening, the EU failed to reach an agreement on the Recovery Fund (the second stage of its economic response to the Covid-19 pandemic). 

The EU did formally agree to and confirm an initial response package worth some EUR 540bln, which will be made available to countries by the 1st of June. 

However, markets wanted to hear of tangible progress in negotiations on the Recovery Fund, which will likely be much larger than the initial response package (hopefully to the tune of multiple millions). With disagreements over how large the next stage of recovery spending should be and how it will be funded, EU leaders have pushed negotiations on this into the future. The only thing that has been agreed to for now on the Recovery Fund is that it is needed. 

Friday Morning: Bad German Ifo Data

More bad European business survey data came out today in the form of April German Ifo data; Ifo’s Business Climate Index fell to 74.3 (80.0 exp. prev. 86.1), Current Conditions dropped to 79.5 (exp. 81.0, prev. 93.0) and Expectations dropped to 69.4 (exp. 75.0, prev. 79.7).

Moreover, Ifo said the Covid-19 pandemic is striking the German economy with full fury and that sentiment at German companies is “catastrophic”. 


1) A key thing to understand about the market for beginner traders is no one knows where the market is going to go. Even when you have a strong fundamental bias (like short EUR amid all this bad data), the market does not necessarily have to behave how you think it should. The market is made up of a collection of thousands, even millions of different participants, each with their own views and emotions and will behave how it wants. Yes, learning to implement fundamentals will DRASTICALLY improve your edge. But, you will never be right all the time. 

2) Technical rebound before a bigger move lower. Sometimes a move “against the fundamentals” can be a technical rebound ahead of a greater move to the downside. Or, if a currency has been under pressure for a number of days and has become oversold, it can enjoy a small rebound, even without an improvement in the fundamentals. All of this could be supporting EUR.



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