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EUR/USD to Snap 2-Week Losing Streak, but Gains Unlikely to Continue

By Yasin Ebrahim – The euro is on track to snap a two-week losing streak against the dollar, but this is unlikely the start of a trend as the coronavirus impact will leave a bigger economic dent on eurozone than the U.S., Bank of America (NYSE:BAC) said.

EUR/USD fell 0.50% to $1.0894.

EUR/USD will depreciate in the coming months as the eurozone fiscal response to the pandemic has not been as strong as that of the U.S., Bank of America said.

The fiscal response from the EU has been hampered by infighting as member states have disagreed on the best way forward to structure a coronavirus relief package. But a Franco-German effort has sparked hopes of a breakthrough after both nations earlier this week agreed a $545 billion pandemic response.

The funds raised from the proposed bond, which needs the backing of other member states, would be distributed as grants rather than loans to EU member states worst hit by the pandemic.

While this is a "positive step," it isn't a Eurobond and fails to address "unsustainable debt dynamics" in the eurozone periphery, Bank of America said.

On the monetary policy front, meanwhile, minutes of the ECB meeting in April signaled the central bank stands ready to roll out more stimulus, if needed, at its June meeting.

At the June meeting, the Governing Council would "have to stand ready to adjust the PEPP and potentially other instruments if it saw that the scale of the stimulus was falling short of what was needed."

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