MUFG Bank analysts point out that upside risks to the euro include further progress towards reopening the eurozone and global economies; a cure and / or a vaccine would probably favor a higher EUR / USD rate overall as well, and a budgetary union in Europe by allowing fiscal transfers to support the recovery in the eurozone economies most affected by the coronavirus .
“There is not yet evidence in Europe that the reversal of blockages leads to an acceleration of the growth rate of new cases of COVID19. He assured that the lockdown measures could continue to be relaxed in the coming month, even if it was only the beginning. At this point, we see no clear reason why the reversal of the blockades should favor the euro against the US dollar or vice versa. “
“Until there is more clarity on how the ECB / Bundesbank intends to solve the problem, a period of three months is allowed to justify the purchases of assets as part of their purchase program in the public sector (PSPP). Although the decision does not concern the current political support measures for COVID-19, including directly the Pandemic Emergency Purchase Program (PEPP), it still poses downside risks to the euro if it is not resolved in a timely and satisfactory manner. “
“Recently there have been encouraging developments indicating that European governments are moving closer to harnessing the common fiscal capacity to provide lasting stimulus to support economic recovery.”
“The European Commission should soon present its stimulus fund plan before the EU summit scheduled for May 27. Doubts remain as to whether the proposals will be watered down and whether € 500 billion is sufficient support. However, further progress towards a fiscal union in the coming month could help lift the euro. “