EUR / USD will remain trading within the 1.15-1.20 range – Westpac

An increase in the Pandemic Emergency Purchase Program (PEPP) and more financing with TLROs seems increasingly likely at the meeting of the European Central Bank (ECB) on December 10, according to analysts at Westpac. See the EUR / USD trading in the 1.15-1.20 range, as COVID-19 continues to limit the recovery in the region.

Key statements:

“Despite suggestions from the UK media that the European Commission summit on November 19 could have been organized in the hope of a post-Brexit trade deal, he has always focused on the ‘responses of the EU to the COVID-19 pandemic ‘. Recent resistance (particularly from Poland) to the Recovery Fund means that this approach has become more appropriate. It is also likely that the coordination of an eventual vaccine program in the region will be discussed ”.

“Increased COVID-related restrictions in Europe over 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 billion. Italy, France and Germany have estimated the cost of the restrictions at around 10 billion per month, and this can probably be transposed to the entire region. The early enactment of the Recovery Fund to facilitate increasing deficits is therefore more critical. Failure to achieve ratification will increase pressure on the ECB. The prospects for a trade deal between the EU and the UK are also important for regional sentiment in 2021. “

“The ECB has reiterated its intention to recalibrate policy tools with a bias towards increasing the PEPP and to provide more favorable TLTROs at its December 10 meeting. Until then, the EUR / USD is likely to remain in its 1.15-1.20 range.”.