Will the European COVID-19 Recovery Plan be realized!? "May 19 Highlights and Event Schedule"

Yesterday, Germany and France proposed an astonishing COVID-19 reconstruction plan, which caused the euro to rise.

Riding the euro’s rise, the euro slipped sharply against the yen, and the cross yen rose unusually.

I think there may have been an intervention by the SNB (Swiss National Bank) involving euro buying and franc selling.

Also, yesterday U.S. venture Moderna's new COVID-19 vaccine showed promising immunogenic signals in its first clinical trial, and vaccine optimism pushed European and American stock prices higher, leading the market to tilt toward risk-on.

◎ Today's Focus

1) European COVID reconstruction plan

Yesterday, Germany and France announced a surprising proposal.

They proposed a COVID reconstruction plan of about 500 billion euros to rebuild the economy affected by the coronavirus.

Moreover, the key point is that it would be funded as grants and subsidies, not loans, meaning no repayment is required.

Germany and the Netherlands have historically opposed joint bonds or so-called corona bonds, and Germany recently ruled that part of the ECB's easing measures was unconstitutional, so it was surprising that Germany proposed a reconstruction plan.

The EU welcomes Germany and France’s proposal.

Next, the EU finance ministers’ meeting is held today, so all remaining member states—especially Northern European fiscally conservative countries like the Netherlands and Austria—will be watched to see whether they support it.

2) WHO Annual Assembly

At yesterday’s WHO Annual Assembly, Taiwan was not allowed to participate as an observer, and the United States quickly criticized China, with President Trump stating he would soon announce criticism of the WHO and suspension of contributions.

In response, China announced it would donate $2 billion (about 210 billion yen) over the next two years as part of international virus countermeasures.

They are increasing their voice and presence within the WHO.

However, many countries agreed that investigations into the origins of COVID-19 are necessary, and they will be pursued, though the timing and methods have not yet been decided.

Here, too, there is a sense that the WHO is inclined to favor China.

Will this situation be allowed to continue!?

Or will it lead to division?!

Today as well, focus on the moves of the U.S. and China at the WHO Annual Assembly.

3) Remarks by key figures

Today, testimony is scheduled before the U.S. Senate Banking Committee by Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin.

Attention will be on the U.S. economic outlook and future monetary policy, including possible moves toward negative rates.

Additionally, there are positive remarks about negative rates continuing in the U.K.

As shown above, market moves in Europe around reconstruction plans, U.S.-China relations, and statements about China at the WHO are highly likely, so caution is warranted.

4) UK employment

Today, the United Kingdom will release April employment data.

With the economy halted by lockdown, attention is on how bad the figures will be.

Since May is expected to be the bottom for economic and employment deterioration, today’s employment statistics are highly anticipated.

5) Crude oil prices

As restrictions ease in Europe and the U.S. and the economy restarts, demand for oil is rising, pushing prices higher.

If it returns to the 30-dollar range, it quickly rose to the 33-dollar range.

It remains to be seen whether this rise will continue or whether the 30-dollar level can be solidified.

◎ Today's Event Schedule

May 19 (Tuesday)

EU Finance Ministers' Meeting

10:30 AUDRBA Board Minutes

15:00 GBPUK Employment, Unemployment, and Average Wages

18:00 EUR Germany ZEW Economic Sentiment Index

18:00 EUR Eurozone ZEW Economic Sentiment Index

21:30 USD U.S. Building Permits

23:00 EURLane ECB Executive Board Member Comment

23:00 USD Kashkari/Minneapolis Fed President Comment

23:00 USDPowell Fed Chair and Mnuchin Treasury Secretary Remarks (Senate testimony)

May 20 (Wednesday)

03:00 USD Rosengren Boston Fed President Remarks

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