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Sluggish EUR/USD rebound reflects a slower distribution of both Recovery Funds and covid vaccines. Though support should be evident below 1.20, upside also seems limited, in the view of analysts at Westpac.

Key quotes

“European Council’s intention is to reinforce solidarity but it may also highlight failings in covid vaccination rollout as well as difficulties in vaccine production and delivery. It may also raise issues around the financial response to the pandemic given that the much-vaunted Recovery Fund is still to be disbursed.” 

“Stuttering vaccine and fund roll-outs have weighed on regional sentiment especially as the path for unwinding lockdown restrictions is being delayed.”

“Germany may be avoiding a technical recession, given the lift to 4Q GDP to +0.3% QoQ, but the duration of the current lockdowns is eroding hopes for an early recovery. The data flow in the coming week is unlikely to provide any major lift to sentiment should the EC Conference fail to raise the hopes for more effective pandemic responses.”

“EUR/USD is likely to remain contained within an effective 1.20-1.23 range.”

 

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