EUR/USD to slide towards the 1.17-1.22 range support – Westpac

Europe’s faltering vaccine rollout, continued Covid restrictions and delays in Recovery Fund distribution suggest a slow recovery path. EUR/USD may test 1.17-1.22 range support, according to economists at Westpac. 

Key quotes

“Comparatively poor EU vaccine rollouts and growing discontent over the distribution of both vaccines and Recovery Funds at national levels became more acute this week on the halting of AstraZeneca usage on safety concerns.” 

“The impact of the poor rollouts has become clear this week with rising Covid-19 case counts in many EU countries, including Italy, France and Poland, leading to tighter restrictions and delays in unwinding restrictions elsewhere.”

“Economic advisers to Germany’s Merkel cut German growth forecast to 3.1% in 2021 from their Nov forecast of 3.7% and warned that their projection of 4% growth in 2022 was at risk should the anticipated rise in consumer activity be suppressed by rising COVID-19 cases.” 

“Relative growth and vaccine rollouts are impacting FX and so the risk for EUR against the firming USD is an early slide to test 1.17-1.22 range support.”