EUR/USD to see spikes toward 1.30 in Q1 2021 - Westpac

FXStreet reports that economists at Westpac think it is hard to argue against a firmer EUR as manufacturing resilience offers hope but there will be plenty of area of restraint. All in all, the EUR/USD pair is set for a potential move towards 1.30 in the first quarter of the next year. 

“The new US administration is likely to be more collaborative with the EU, turning the tide in trade relations after the hostile escalation of tensions during the Trump Administration. Although the EU may start to regulate against the tech giants, the initial thawing of relations, especially in the aerospace sector, is likely to add a further leg of support for EUR.”

“Eurozone nations are extending or imposing more stringent COVID-19 related restrictions into at least mid-January. This highlights the potential for serial periods of tighter restrictions until vaccination programs meaningfully protect the population. Such a situation is unlikely until H2 21. However, recent production data and new order components of the PMIs suggest that prospects for manufacturing are positive for 2021. Eurozone should benefit from the rapid recovery in China and N.E. Asia more than the US.”

“EU is now set to implement its Recovery Fund, but implementation may prove to be a lengthy process. Nevertheless, it will provide support to national fiscal expansion and reduce pressure on ECB, but also lift EUR prospects by providing greater confidence across the region. EUR/USD has solidly moved through resistance around 1.20 and appears to be well supported for potential moves towards 1.30 in Q1 2021.”