EUR/USD: Risks related to COVID-19 may limit gains after the successful EU Summit

EUR/USD has ‘sold the fact’ on the impressive EU deal news. Rises in Italian bonds, advances toward coronavirus vaccines and ECB support open the door to gains, FXStreet’s analyst Yohay Elam briefs.

Key quotes

“While the EUR/USD pair is suffering from a ‘buy the rumor, sell the fact’ response to the EU accord, Italian bonds are rallying, showing enthusiasm. The euro may play catch up as new bullish positions come into play.”

“The EU accord is a pact worth €750 billion, including landmark €390 billion in funds raised by the European Commission – Eurobonds in all but name. More importantly, the taboo on sharing the burden is broken, potentially strengthening the union and providing confidence to private investors. Also, leaders approved the seven-year EU budget ahead of schedule – an achievement that minimizes the exhausting five-day effort.”

“EUR/USD has reasons to rise from the American side of the equation as well. The safe-haven dollar is on the back foot amid a lengthening list of reports about progress in developing a coronavirus vaccine and a curse. These include efforts from the University of Oxford/AstraZeneca, BioNTech/Pfizer, and CanSinoBIO\s COVID-19 immunization advances, and Synairgen's promising medication.” 

“The drop in US coronavirus cases and deaths – probably a quirk related to the ‘weekend effect’ is also cheering investors and weighing on the greenback. That may change when new American figures are released.”