EUR/USD may face event-driven volatility this week
- EUR/USD conslidates after last week's bullish close above 1.20.
- EU's budget and relief package will be decided on Thursday.
- Poland and Hungary have vowed to veto the budget.
- The ECB is expected to boost its asset purchase program.
EUR/USD may face increased volatility, with the European Union (EU) scheduled to decide budget and relief package on Thursday alongside European Central Bank's monetary policy decision.
Both Poland and Hungary have vowed to veto the budget, including the €750 billion ($909 billion) coronavirus stimulus package. Both nations believe the budget is punishing them for their conservative values, as noted by Financial Times.
The Eurozone is already facing deflation since September, and the odds of a double-dip recession have increased with the resurgence of coronavirus. As such, a fiscal stimulus package is the need of the day and will likely bolster the bullish pressure around the euro.
EUR/USD rose to a 2.5-year high of 1.2178 last week and is currently trading largely unchanged on the day near 1.2133.
The ECB, too, is expected to increase the size of its asset purchases this Thursday. While that's typically bearish for the currency, the central bank's impending dovish seems to have been priced in by markets. Moreover, the central bank needs to match the Federal Reserve's aggressive easing to put downward pressure on the euro.
Data wise, the focus will be on the German industrial production due on Monday, German ZEW economic sentiment and revised Eurozone GDP figure on Tuesday, German trade balance on Wednesday, and Italian industrial production on Friday. The ongoing Brexit saga could also influence EUR/GBP and EUR/USD.
Technical levels