FXStreet reports that economists at Westpac believe that the prospect of the European Central Bank (ECB) reducing the pace of PEPP bond-buying and improving data could lift EUR/USD to retest the 1.20-1.21 area.

“The unwinding of lockdown restrictions and accelerated vaccination programs should now support regional activity into year-end.” 

“If this month’s staff projections reflect recent firm data and lift the end of forecast period CPI from the lowly 1.4% in June, then ECB may also outline its proposed ending in March 2022. That would still leave the ECB purchasing some EUR20 B bonds per month through its APP (Asset Purchasing Program) but would signal a marked tightening despite the recent policy review.”

“A solid base has formed below 1.17, but a firm reduction in the PEPP pace and a lift in CPI projections will likely be needed to trigger a EUR/USD move to retest 1.21.”