Despite improved prospects of a sound H2 21 EU rebound as the Recovery Fund is disbursed and COVID-19 restrictions ease, EUR gains are likely to face the resistance of the European Central Bank, as reported by Westpac.
EU updated forecasts signal a notable H2 2021 lift in activity
“The EU published its quarterly economic forecasts this week with lifts in growth for both 2021 and 2022 from their Winter profile (4.2% from 3.7% and 4.4% from 3.7% respectively). The uplift is due to the now successful regional covid vaccine rollout and expectations for easing of the majority of COVID-19restrictions during H2 2021.
ECB officials have also stressed the flexibility of PEPP purchases, the pace of which was increased into the current quarter and now looks set to slow into mid-year as full ratification of the Recovery Fund appears imminent, given the EC summits.”
“Although EUR/USD looks set to breach its recent range (1.17-1.22) resistance, ECB officials are likely to voice concern in order to dampen moves above 1.22.”
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