The recovery in EUR/USD has lost legs just below 1.1350. The pair could resume its downtrend if it fails to surpass the 1.14 level, economists at Westpac report.

Might the end of PEPP widen Eurozone Bund Spreads and pressure EUR?

“Europe is sustaining a degree of covid restrictions as cases remain persistently high and there are further pushes from the more impacted Eurozone nations to add to their fiscal support.”

“The end of ECB’s PEPP, expected to be confirmed at next week’s ECB policy meeting, could lay bare the fiscal shifts within the region and return as a means of instability through bond spread widening.”

“In the near-term, markets appear to be focusing upon the subsiding of risk aversion. Although EUR finally squeezed firmer as aversion heightened, the current risk lift is impacting USD and could see EUR/USD test 1.14. Failure to break higher could see the prior trend resume for a further test of 1.1200, if not 1.1000-50.”