Euro hovers around four-month peak as EU leaders tackle ‘mission impossible’ By Reuters

By Hideyuki Sano

TOKYO (Reuters) – The euro held close to four-month highs against the dollar on Monday, with investors waiting for European leaders to break a deadlock and reach an economic bailout deal in their marathon summit talks.

The euro changed hands to $ 1.1415 (), 0.1% less, but still not far from a four-month high of $ 1.1452 reached on Wednesday.

EU leaders are at a standstill due to a proposed recovery fund of 750 billion euros ($ 858.30 billion), which the EU Executive European Commission must collect on behalf of all of them in the markets of capitals.

That would be a historic step toward greater fiscal integration for the union, but a group of wealthy “frugal” states in northern Europe were pushing for a smaller fund and trying to limit how payments are divided between grants and loans. refundable.

A source said 350 billion euros in grants was the acceptable maximum for the northern savers’ camp, compared to 400 billion considered the minimum by many others, including Germany and France.

“Given that they can narrow their differences to just 50 billion (euros), the markets are still hopeful of reaching a compromise deal, albeit the risk of the deal being fully canceled,” said Christopher Wong, FX analyst at Maybank in Singapore. .

As European Council President Charles Michel urged leaders to accomplish the “mission impossible,” diplomats said they might leave the summit and try a deal again next month.

“If they reach an agreement, we should see a new rebound in the euro,” said Yujiro Goto, chief currency strategist at Nomura Securities.

But many market players also believe that the euro will be backed even if the deal is not reached this time, as long as there is a chance of a deal on the stimulus.

“I don’t know what to expect from the summit. But even if there is no agreement, the impact will be limited given that the euro appears to have quite a strong momentum these days,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

the It rose 0.2% to 96,157, as the US currency gained, as it often has since the pandemic, in a pullout of US stock futures.

But their progress was kept under control as investor risk appetite remains strong, backed by more stimulus bets not only from Europe but also from the United States.

A battle in the United States Congress over a new coronavirus aid bill began late last week when Republicans and Democrats pushed for their own agenda.

Republicans want the next coronavirus aid bill to cost no more than $ 1 trillion, while leading Democrats have vowed to fight for much more, in the range of the $ 3 trillion bill.

“We see more political pressure on Republicans to commit to Democratic goals because Republicans do poorly in polls … Senate Republicans are not in a position to contain the stimulus,” wrote Steven Englander, chief global strategist at FX at Standard Chartered (OTC 🙂 Branch of Bank New York in a report.

Expectations of more government spending have offset concerns about the rise in coronavirus cases in the United States, as well as fears about deteriorating relations between the United States and China.

The British pound fell 0.3% to $ 1.2526 while the Australian dollar lost 0.15% to $ 0.6983 .

The Japanese yen decreased 0.3% to 107.34 per dollar .

It showed no reaction to Japan’s trade data showing that exports in June fell 26% from a year earlier, worse than expected.

The offshore remained firm at 6.9931 per dollar , just slightly below last week’s four-month high of 6.9806.