EUR/USD: The bigger PEPP, the better for euro

The recent EUR/USD slide from the high of 1.1257 to around 1.12 may leave room for a resumption of the rally as the European Central Bank is expected to increase its Pandemic Emergency Purchase Program (PEPP), Yohay Elam, an analyst at FXStreet, reports.

See: Eight major banks expectations for today's ECB meeting

Key quotes

“The ECB is expected to enlarge its PEPP. Speculation ranges from a top-up of €250 billion to as much as €750. For the euro, the bigger the package, the better.” 

“Christine Lagarde, President of the ECB, will be presenting new staff forecasts for growth and inflation. While gloomier scenarios may prompt further monetary support and boost the euro, they could also weigh on it.”

“The German government took another step in abandoning its financial crisis-era austerity policies, by approving a stimulus package worth €130 billion, 30% more than expected. That is positive news for the common currency.”

“In the US, protests against racial discrimination have calmed down after a turbulent week. Prosecutors in Minnesota upgraded the murder charge against the police officer that killed George Floyd contributing to the calm. While President Trump has been slipping in opinion polls, markets have largely ignored the events.”