EUR/USD: Deal on EU Recovery Fund provides more support for the euro – MUFG

After more than four days of acrimonious negotiations, EU Leaders finally reached a deal on the EU Recovery Fund, which analysts at MUFG Bank continue to view as a positive for the euro. The EUR/USD pair could accelerate the upward move on a break of the 1.1495 March peak.

Key quotes

“The compromise agreement has lowered the amount of support to be provided as grants to €390 billion and raised the amount of loans to €360 billion although the overall size of the package at €750 billion remains unchanged.”

“The final compromise also included budget rebates including for the frugal four. Denmark, Germany, the Netherlands, Austria and Sweden will get more than €50 billion in rebates over the next seven year EU budget. The proposals must now be passed by national parliaments which creates some uncertainty. Once agreed, the EU Recovery Fund is expected to begin disbursing funds at the start of next year.”

“While the agreement may not provide a fresh catalyst for further upward momentum in the near-term, it should continue to provide more solid foundations for the euro to remain at higher levels. The high from the 9th March at 1.1495 remains the next key resistance level for EUR/USD which could open the door to further upside.”