Eur, usd

EUR, USD]
EUR-USD has extended a three-month high at 1.1977, floated by dollar weakness. The U.S. currency has come under pressure against metals (copper hitting seven-year highs, aluminium 2-year highs) and Bitcoin and other crypto currencies, has seen a 32-month low against the New Zealand dollar, and a three-month low versus the Australian dollar. There seems real momentum behind the move, and prospects for EUR-USD to break above the 31-month high seen in August at 1.2024 look good. While there doesn't appear many strong prevailing reasons to bullish on the euro (recession bound eurozone nations, strong dovish bias at the ECB, the 750 bln euro EU recovery fund being delayed by a disputed with Poland and Hungary), European stock markets have outperformed global peers notably in November. We have been anticipating the euro gaining versus the dollar and yen while underperforming against more cyclical currencies on the view that risk appetite is likely to hold up in the months ahead, given optimism for a vaccine-facilitated return to economic normality in 2021, or something approaching it, alongside massive liquidity from world central banks, low inflation, and ongoing QE programs that force investors to search for the higher returns to be had in global equity markets. Negative real interest rates in the U.S. and the Fed's codified lower-for-longer policy rubric are considerations, as are the U.S. deficits and capital seeking higher returns in buoyant global markets.