NAB Research discusses EUR/USD outlook, and expects the pair to end the year at 1.22 ahead of 1.25 by mid-2021.
"EUR/USD has punched above the technically and psychologically significant $1.20 level – last seen only momentarily at the start of September and prior to that not since May 2018 – without the EU Recovery Fund yet being approved," NAB notes.
"For its part, Poland and Hungary have intimated they are open to new proposals aimed at resolving their row with the EU. Our view remains that if it is the case that Hungary and Poland can’t be placated next week, the EU (under the current German chair) will resort to seeking Fund approval by qualified majority vote. This is clearly suboptimal (including complicating the approval of the new 5-year EU budget as well as initiating a mini-EU crisis) and so is a less positive outcome for the EUR. Yet it wouldn’t meaningfully detract from our forecast for EUR/USD ending the year above 1.20 and rising to above 1.25 in H2 2021, or that AUD/EUR will remain for the most part contained within the existing 0.60-0.62 effective range," NAB adds.