Euro at Multi-Month Highs as Deal Within Reach

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EU officials getting close to EU stimulus deal
US equity markets pin hopes on vaccine
Nikkei -0.09% Dax 0.56%
UST 10Y 0.61
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Gold $1810/oz
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After a sluggish start to the trading week that saw equities decline in Asia and early European trade, risk sentiment improved on hopes of a compromise for an EU stimulus package and news of a possible new COVID vaccine from AstraZeneca.

Euro hit multimonth highs rising above 1.1450 level on news that EU officials were narrowing on a compromise package of 390B in grants and a similar amount in loans as the “frugal four” appear to have agreed to almost the full level of grants initially proposed by EU. The negotiations remain ongoing but with the core agreement in place, the markets are optimistic that a deal will be done.

Although the full stimulus package falls short of initial targets it nevertheless marks the first time that the European Union has decided to issue significant amounts of federated debt and also agree on mutualization of stimulus measures that could provide much-needed relief to the region’s weakest members.

The news should continue to boost the euro especially in light of the fact that Europe appears to have much better control over COVID right now and can expand its economic activities while the US faces massive pandemic outbreaks in the South and Southwest of the country. If the EU authorities actually ink a deal the single currency could move through the 1.1500 barrier on hopes an economic rebound.

In the US today the calendar is barren but the markets will be eager to hear the latest vaccine news from AstraZeneca on hopes that this particular version could offer more durable immunity to the virus. The tech-heavy Nasdaq is back in the lead this morning after showing relative weakness last week and if the news on the medical front proves positive investor enthusiasm could push it higher as the day proceeds.

Boris Schlossberg
Managing Director

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