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FX analysts grapple with euro outlook as Covid cases rise

There is broad agreement that the ECB will not cut rates further, but the coronavirus pandemic is seen as the key factor governing the outlook for the euro.


Despite agreeing on the likelihood of the European Central Bank (ECB) cutting interest rates further, analysts differ in their expectations for the value of the euro at the end of this turbulent year.

In a research note published at the end of October, George Saravelos, global head of FX research at Deutsche Bank, suggested the key variable for EUR/USD was neither the ECB policy response nor the scale of Covid lockdowns, but rather a stabilization in coronavirus numbers.

“A relative peaking of Covid cases in Europe versus a rise in the US, in addition to rising political risk premium on the back of dysfunctional US politics should be helpful to the euro,” he tells Euromoney.

According to Paul Robson, head of G10 FX strategy EMEA at NatWest Markets, a Brexit deal has potential to support the euro.

We see EUR/USD appreciation in 2021, but the euro to underperform other currencies
Ebrahim Rahbari, Citi

“The sign-off for the European Union recovery fund should also be supportive, as it should reduce the currency’s risk premium,” he adds.


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