Pound Higher After EU Seals Deal On Recovery Package

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The pound appreciated against its major opponents in the European session on Tuesday, as European shares rose on hopes of a Covid-19 vaccine and a landmark European Union deal on a stimulus package worth ?750 billion.

After four days of marathon talks in Brussels, EU leaders conceded the package worth EUR 750 billion. Accordingly, the bloc will issue debt jointly which would be provided to member nations hit hardest by the Covid-19.

Out of the EUR 750 billion recovery plan, EUR 390 billion will be in the form of grants and EUR 360 billion of low interest rate loans. Now the deal needs to be approved by the parliament of 27 member states.

Optimism over a coronavirus vaccine improved after AstraZeneca and Pfizer both reported positive results from their early human trials.

Data from the Office for National Statistics showed that the UK budget deficit increased sharply in June.

Public sector net borrowing excluding public sector banks increased GBP 28.3 billion to GBP 35.5 billion, which was the third highest deficit in any month on records.

The pound moved up to 1.2716 against the dollar, its highest level since June 11. The pound is seen finding resistance around the 1.29 level.

The pound firmed to a 5-week high of 136.44 against the yen, after falling to 135.58 at 5:00 pm ET. The currency is likely to face resistance around the 138 level.

Data from the Ministry of Internal Affairs and Communications showed that Japan inflation rose 0.1 percent on year in June – in line with expectations and unchanged from the May reading.

Core CPI, which excludes volatile food prices, was unchanged on an annual basis – versus forecasts for a drop of 0.1 percent following the 0.2 percent decline in the previous month.

The pound climbed to near a 5-week high of 1.1921 against the franc and an 8-day high of 0.9009 against the euro, off its prior lows of 1.1878 and 0.9049, respectively. The next resistance for the pound is likely located near 1.22 against the franc and 0.88 against the euro.

Looking ahead, Canada retail sales for May and new housing price index for June are due in the New York session.

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