By Yasin Ebrahim
Investing.com – The euro racked up gains on Wednesday, and could reach $1.21 against the dollar by the end of the year as the greenback faces a rocky few months amid rising cases and stimulus worries, analysts said.
EUR/USD rose 0.36% to $1.567.
“The ‘one step forward, three steps back’ style of U.S. reopening has exposed those weaknesses to the market, undermining the USD,” TD FX analyst Mark McCormick (NYSE:MKC) said.
The U.S. has struggled to contain the spread of the virus, which has infected more than 3.9 million nationwide, forcing some states to roll back recent measures taken to reopen businesses.
The struggles in the dollar against the euro have been compounded recently by signs that EU members are warming up to the idea of forming a fiscal union following their historical EUR750 billion coronavirus package agreed yesterday.
The pandemic aside, the dollar also faces headwinds, albeit short-term, from potential delays to fiscal stimulus, ING said. “A possible delay to the U.S. fiscal stimulus (Republicans reportedly are working on their own version, trying to bypass President Trump’s plan to include payroll tax cuts in the stimulus) is another in a series of short-term blows to the US dollar.”
Senate Majority Leader Mitch McConnell on Tuesday reportedly said he does not expect that the bill, which includes new money for the paycheck protection program, and seeks to extend the program by at least six months, would be rolled out within the next two weeks.
With Congress set for a recess in August, time is running out for lawmakers on Capitol Hill to resolve their difference over the coronavirus aid bill.
The Dutch bank said the path to gains for the single currency is more likely amid dollar weakness ahead.
“We look for limited downside to EUR/USD from here (despite plenty of good news being priced in by now) and see EUR/USD at 1.20 by year-end as further dollar weakness unfolds.”
EUR/USD to $1.21 by Year End as Covid Crisis, Stimulus Worries to Hurt Dollar
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