FXStreet reports that economists at Rabobank see risk that long EUR positions will be pared back further as covid-19 takes another swipe at the Eurozone’s economy. 

“We see scope for a move towards the 1.16 level on a one-to-three month view. Dependent on the path of the pandemic and on the results of the US election, we see scope for a drop to the 1.14 area in the coming months.”   

“The ECB is promising further monetary action soon and the market is speculating that a deposit rate cut could be a measure under consideration. Pushing the deposit rate further into negative territory would likely weigh on the EUR and serve as a reminder that the Fed is the only G10 central bank that has explicitly steered away from a negative interest rate policy.” 

“Despite the progress made by the EU in announcing its Recovery Fund this summer, going forward the EUR could still be weighed down by a lack of fresh developments with respect to reforming the fiscal framework in the region.”

“There are concerns that a contested election this year could be a far more volatile event which, on the heels of Black Lives Matter protests and elevated unemployment, could trigger social unrest. Such a result would likely fuel demand for safe-haven assets including the USD.”