EUR / USD Recovers to 1.1880 as New US Stimulus Hopes Increase Risk Appetite

• EUR / USD rallies for the fourth day in a row to hit a month-long high at 1.1880.
• The US dollar sinks amid hopes for a US COVID-19 stimulus deal.
• EUR / USD could appreciate to 1.20 in December – Danske Bank.

The euro It rallied for the fourth day in a row against the US dollar on Wednesday, extending its recovery from last week’s lows of 1.1685 to one-month highs near 1.1900.

The euro appreciates due to the weakness of the US dollar

The common currency has rallied nearly 0.5% so far, with the US dollar trading at multi-week lows after US President Donald Trump suggested that it is ready to accept a large coronavirus relief package. This has fueled investor optimism, which has favored riskier currencies, increasing negative pressure on the dollar.

White House spokeswoman Allysa Farah said she is optimistic about the tax deal and President Trump suggested he would be willing to agree to the $ 2.2 trillion bill proposed by the Democratic party. However, Trump’s position is in contrast to that of Senate Republicans who have gone public with their opposition to a large bill.

EUR / USD seen at 1.20 in December – Danske Bank

In a medium-term perspective, Danske Bank’s currency analysis team observes that the euro moves towards 1.20 in December: “A Brexit solution, a Biden victory and an EU budget agreement may culminate in December to move to EUR / USD at 1.20, which is still our best (and base) case scenario. There is a risk that we will be overly optimistic and if we do not see improvements from December we expect to change our profile from one to twelve months (currently 1.20 in six months) in favor of the USD. ”