More Pandemic Emergency Purchase Program (PEPP) and funding seem ever more likely at next month’s European Central Bank (ECB) meeting on December 10. Meanwhile, EUR/USD’s 1.15-1.20 range is set to persist as COVID-19 restrictions crush the region’s recovery, per Westpac.
Key quotes
“Despite UK media suggestions that EC’s 19th Nov summit might have been arranged in hope of a post-Brexit trade deal, it has always been set to focus on ‘EU responses to the COVID-19 pandemic’. Recent resistance (notably from Poland) to the Recovery Fund means that this focus has become more appropriate. Discussion of coordination of an eventual vaccine program in the region is also likely.”
“Increasing covid-related restrictions across Europe in the past month have put further pressure on regional budgets. Italy announced that it will seek EC approval to increase its deficit by another €20 B. Italy, France and Germany have estimated the cost of restrictions at around €10 B per month and this can likely be transposed across the region. Prompt enacting of the Recovery Fund to facilitate rising deficits is, therefore, more critical. Failure to gain ratification will increase pressure on the ECB. Prospects for an EU/UK trade deal are also important for regional sentiment into 2021.”
“ECB has reiterated its intention to recalibrate policy tools with a bias to increase PEPP and provide more favourable TLTROs at its Dec 10th meeting. Until then EUR/USD is likely to remain in its 1.15-1.20 range.”
Share
