“Despite the ECB pledging to analyse all policy options available, it seems most likely that the December ECB meeting will see the bank still using the 2020 ECB playbook. That implies an increase in size and extension in duration of the emergency bond programme (PEPP). Credit and funding issues will be met via an adjustment to the targeted long-term refinancing operations (TLTROs).”
“While additional ECB easing is largely discounted we have seen real money and leveraged investors paring back long EUR positions, albeit from all-time highs in late August. A slower growth backdrop, easier monetary policy, and political concerns are set to weigh on EUR performance. The combination of factors suggests that while we expect the EUR to hold up against the USD, it may struggle versus currencies more directly risk and growth correlated in 2021.”
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