EUR/USD may firm within its 1.15-1.20 range as risk sentiment improves and the European Central Bank (ECB) is likely to keep policy unchanged. Rising COVID-19 cases and restrictions should cap EUR gains, economists at Westpac inform.
Key quotes
“Although ECB members have indicated through this week that there is unlikely to be any change in their policy stance at next week’s ECB meeting, there has also been an increasing sense of concern over the persistently rising COVID-19 case counts, not just in Spain and France but also Italy, Germany and across the Eurozone. Increasing curfews and restrictions will put pressure on the region’s recovery.”
“The pandemic will remain a dominant factor for policy and regional growth. However, the huge success for this week’s first EU issuance of SURE (Support to mitigate Unemployment Risks in an Emergency) bonds, also the largest EUR sustainable bond issue, has provided support for EUR. The €17 B on offer (split of 10yr and 20yr) was over subscribed by 14 times (over €233 B).”
“EUR may be gaining from global risk appetite as a US support package appears more likely and progress in EU/UK post Brexit trade talks. However, EUR/USD is still likely to remain in its recent 1.15-1.20 range.”
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