ANALYSTS VIEW 2-EU progress pushes euro higher, but uncertainty caps gains

* Euro gains 0.3% to four-month high of %1.1467

* Modest move suggests limited upside – analysts

* Some trepidation as deal not sealed yet – analysts (Recasts background and refreshes quotes)

LONDON/SINGAPORE, July 20 (Reuters) – EU leaders were making progress on Monday after three days of haggling over a coronavirus rescue plan, sending the euro to a four-month high.

Diplomats are in a final push on Monday to reach what the chairman of the EU summit described as “mission impossible”.

On Sunday, a compromise failed when a deal envisaging 400 billion euros in grants was rejected by thrifty northern states. Bloomberg News reported on Monday that those countries would accept 390 billion euros in grants, citing unnamed officials.

In Asian afternoon trade, the euro rose 0.3% to as high as $1.1467, its highest since March while European stock futures turned positive.

Here are analysts’ views on the possible outcomes from here and on how investors may respond:

JIM REID, HEAD OF GLOBAL FUNDAMENTAL CREDIT STRATEGY, DEUTSCHE BANK, LONDON:

“It seems much depends on whether Macron believes this to be ambitious enough…it seems we may be on hold until this afternoon though but the fact that we are still going well into a fourth day suggests a desire to get something done.”

HAO ZHOU, FX ANALYST, COMMERZBANK:

“It might be enough for European leaders to at least produce a statement during the day, referring to the progress made in the negotiations, in order to prevent a major collapse in the euro exchange rate. And even if they do not, I see at least a continued weakness of the dollar limiting the downside in euros.”

RODRIGO CATRIL, FX ANALYST, NATIONAL AUSTRALIA BANK, SYDNEY:

“There’s a growing confidence that the downside risk for the euro is now limited on the basis that we’re headed toward some kind of deal.

“But for the euro upside there is a lot of uncertainty… the big picture is that Europe is making a huge, huge step toward a fiscal union – now the size and extent of this fiscal union and conditionality around it is what we don’t know.”

EMMANUEL CAU, HEAD OF EUROPEAN EQUITY STRATEGY, BARCLAYS:

“Despite the obvious disagreements between countries and a reduction in the overall package, the fact that an agreement seems possible and that the main points of the proposed plan are respected, is a good thing.”

JOE CAPURSO, FX ANALYST, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY:

“The euro has lifted, but it’s not a large amount. I think some of the good news is probably already priced in, so maybe there’s not a lot of upside to the euro from here.

“We’ll get a better sense when London opens, and it could push the euro a bit higher, but I don’t think it will get to $1.16 or anything like that.” (Reporting by Julien Ponthus and Yoruk Bahceli in London and Tom Westbrook; Editing by Michael Perry and Krishna Chandra Eluri)

Source: Read Full Article