03.06.202116:39 Forex Analysis & Reviews: The EU has changed its mind about free access to the COVID vaccine

The European currency was stuck in a side-channel with the US dollar, and the British pound experienced a surge of strength after data on the growth of activity in the UK services sector last month. It will allow us to count on a more active economic recovery. The data on the eurozone disappointed traders. However, these indicators did not cause a special desire to buy the euro. Everything coincided exactly with the forecasts of economists. But before we analyze the morning's fundamental statistics, I would like to say a few words about how the European Union decided to help weaker developing countries in the fight against coronavirus "in its way."

There will be no access to the vaccine.

At the end of last year, the US government said that it was ready to consider the possibility of temporarily lifting restrictions on the intellectual property of pharmaceutical companies so that the coronavirus vaccine would become publicly available. It should have helped a more active recovery of the world economy in the future. However, according to the latest data, the EU is less optimistic. Although last month, French President Emmanuel Macron and German Chancellor Angela Merkel expressed support for this proposal.

Today, it became known that the EU supports the gradual lifting of restrictions on the export of vaccines. However, it does not support the US proposal to suspend the intellectual property rights of pharmaceutical companies. It is expected that at the meeting on June 8-9, the EU will propose to all 164 WTO members to reduce restrictive measures related to medical products, relax regulatory barriers, and expand the production of vaccines. EU leaders said that giving up intellectual property rights would further delay the delivery of the COVID vaccine in the long term. To address this problem more quickly, increased vaccination exports to countries in need are a more viable solution to the global crisis. More recently, German Chancellor Angela Merkel called on the US to follow the example of Europe, which "has always exported most of its products to the world."

According to the latest figures, the EU has exported more than 300 million doses of the vaccine to more than 100 countries since the start of the pandemic. At the same time, almost all the vaccines produced in the United States remain with them. 41% of the population is fully vaccinated in the US, while in the EU, only 19%.

Now let's quickly run through the data that was published in the first half of the day. As noted above, the eurozone's private sector growth rate improved in May, thanks to a rebirth of the economy amid the easing of restrictions related to COVID-19. The IHS Markit report said that the composite PMI index rose to 57.1 points in May from 53.8 points in April. Economists had expected a rise to 56.9 points. May was a record month since February 2018, and the growth was driven by a marked acceleration in the service sector. In May, it is worth noting that activity in the service sector grew at the fastest pace in the last three years. The final purchasing managers' index for the services sector jumped to 55.2 points from 50.5 points a month earlier.

Among the economies of the eurozone, Italy showed a reasonably significant indicator, while in other countries, the data did not differ significantly from economists' expectations. So, in Germany, the composite index was 56.2 points, and the index of business activity in the service sector rose to 52.8 points. Private sector growth in France was the strongest since July 2020. The composite index jumped to 57.0 points. As for the Italian private sector, the composite PMI jumped to 55.7 points from 51.2 points in April. The services index rose to 53.1 points, returning above the 50-point mark.

As for the technical picture of the EURUSD pair, it has not undergone any major changes compared to the forecast for the first half of the day. The main task of buyers remains to regain control over the resistance of 1.2215. Going beyond this range will lead to a strong bullish momentum that can return EUR/USD to the maximum of 1.2250. The next target of the bulls will be a new local resistance of 1.2290. If the bears return the pressure on the pair and manage to push through the support of 1.2190, we will see an update of last week's lows to the area of 1.2135 and then an attempt to exit to the area of 1.2085.

In the second half of the day, the focus will be on the US data, and they will set the direction of the market.

Economists continue to wonder what the level of employment will be in the United States since they did not guess with the April indicator. According to the average forecast, job growth in May ranges from 335,000 to 1 million. But this is a report on the number of people employed in the non-agricultural sector. Today we are waiting for a report from ADP on the private sector.

Given how uneven the recovery has been recently, economists are divided into two camps: on the one hand, warmer weather in the US, a large number of vaccinated adults seeking to resume travel and socializing, and fewer pandemic restrictions create good conditions for hiring new workers in the service and hospitality industries. At the same time, employers continue to say that they cannot find enough workers to fill vacancies. People still fear for their health and feel pretty good about being on increased unemployment benefits.

In any case, labor market reports for today and tomorrow will set the direction for the US dollar, and they need to be paid special attention.

GBP

The British pound felt particularly good after the PMI data for the services sector, which led to a strengthening position against the US dollar. The pound strengthened against major currencies in the European session on Thursday, as the country's services sector expanded faster in May, helped by a resurgence in business and consumer spending. A survey conducted by IHS Markit and the Chartered Institute of Procurement & Supply, showed that the final PMI in the service sector rose to 62.9 points in May from 61.0 points in April. Economists had expected an increase to 61.8 points.

As for the technical picture of the GBPUSD pair, its further direction will depend entirely on the data on the US economy. Buyers should try their best to break above the resistance of 1.4190, as only this will lead to larger growth of the trading instrument and open a direct path to the annual maximum in the area of 1.4250. If the pressure on the pound returns in the second half of the day, and the bulls still can not do anything in the resistance area of 1.4190, it is best to wait for a decline in the support area of 1.4150 and act from there. The next major support is seen at the base of the 41st figure.