MUFG Research adopts a more constructive bias on EUR in light of the proposal for the EU recovery fund.
"The European Commission’s proposal is another important step forward to help strengthen both the economic recovery in the euro-zone and long-term stability of the single currency area. The new fiscal transfer mechanism has been welcomed by financial market participants although it is a shame that support is unlikely to arrive until next year. The proposal still has to be agreed unanimously by all 27 member states, but with support from the big four EU countries it is likely the deal finally agreed should be relatively close to this proposal," MUFG notes.
"Overall, the EU is now moving in the right policy direction. It has helped to ease downside risks for the euro in the near-term, and is putting in place firmer foundations for a more sustained rebound going forward," MUFG adds.