The euro may benefit from the initial surge in enthusiasm for the Macron / Merkel recovery plan and the relaxation of lock-in restrictions, but the rise should be limited, analysts at Westpac said.
“The recent Macron / Merkel proposals for a COVID-19 shared responsibility recovery fund for the region heralded the Hamiltonian moment of the EU, which brings true budgetary union, but the realities of EU policy mean that this is far from a secure agreement. “
“Germany’s court decisions against the ECB and the ECJ and the Frugal Four’s potential to file an opposition against a recovery fund may not be key issues at the moment, but they will come back and curb the current rebounds in the euro. “
“The markets are currently focusing on a marked improvement in confidence and therefore the EUR / USD may exceed its recent range 1.07-1.10 for a push to 1.12.”