CIBC Research discusses the EUR outlook and maintains a bullish bias targeting the pair at 1.14 in Q3, and at 1.15 in Q4.
"We have long anticipated that despite apparent deficiencies within the Eurozone, the project would be sustained as long as the political will to do so remained. A notable development from the macro devastation caused by the Covid crisis has been the galvanisation of politicians to look at fixing one of the key deficiencies of the system, namely a lack of fiscal transfers. Although we are not yet considering debt mutualisation, there has been progress on that end," CIBC notes.
"The combination of a plan advocating joint debt issuance, German fiscal expansion, and the extension of the ECB PEPP programmes underlines our bias towards medium run EUR impetus. While real money longs have extended to levels not seen since May 2018, leveraged investors continue to maintain a modest negative positional skew, leaving room for position adjustment. The risk to our EUR bullish view is if talks on the EU rescue fund breaks down," CIBC adds.