(Adds the missing word "fact" in paragraph 9 and removes double
quotation marks in paragraph 8)
* After reaching 19-week high, euro gives back some gains
* Analysts debate whether euro can advance towards $1.15
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Olga Cotaga
LONDON, July 20 (Reuters) - The euro retreated from the
19-week high of $1.1467 it reached on Monday amid hopes the
European Union would agree on a recovery fund to help revive EU
economies hit by the COVID-19 pandemic
EU leaders have made progress in Brussels after three days
of talks, but they remain at odds over how to carve up the
proposed 750 billion-euro ($859 billion) recovery fund
The fund's backers initially proposed 500 billion euros of
grants and 250 million of loans. Some countries objected to that
much in grants. They saw 350 billion euros as the maximum, but
showed signs of compromising.
Analysts said the smaller the amount of grants, the more the
euro would fall.
The next level to watch for the euro is $1.1495, which would
take the currency to a year-and-a-half high. It was last up 0.3%
at $1.1456 EUR=EBS .
Jane Foley, senior currency strategist at Rabobank, said the
fact the currency could not stabilise above $1.1460 signalled
more was needed to push it higher.
"There is some good news already in the price. But it does
look like it is struggling this morning to hold above that
$1.1460 level ... as there is a little bit of 'selling the
fact'," Foley said.
"But I would argue that the fundamentals for the euro have
improved since around about May," she said. "We may still need
another couple of positive headlines to take us to the next
step."
The EU summit was originally due to last two days. The fact
that it's continuing into a fourth day of negotiations is
evidence that EU leaders are ready to do everything it takes to
maintain unity in the euro zone, Foley said.
If the 27 countries in the European Union agree on a
recovery fund, said Mike Bell, global market strategist at J.P.
Morgan Asset Management, that should inject confidence in the
euro, no matter the numbers in the deal.
"What has been established is are the EU in times of need
willing to pull together and display unity in order to help out
the hardest-hit economies. And so the exact number is less
relevant than getting a deal done," Bell said.
BNP Paribas had two trades set in to express their positive
view on the euro -- long euro/dollar via options with a strike
of $1.16 and a long euro/Swiss franc, said Parisha Saimbi, G10
FX strategist at BNP Paribas. "Within the next couple of weeks,
seeing $1.16 wouldn't be completely out of the woods.
"On a day like today perhaps we could test $1.15 if we do
get a deal announced today ... perhaps we can see an initial
30-, 40-, 50-pip pare back to take profit, but I think the trend
should still be there for us to get up to $1.16," she said.
"It's still right to believe that the market hasn't fully
priced in a deal outcome," Saimbi said, noting that according to
BNP's positioning index, money managers were long the euro,
albeit still half-way before seeing positions becoming
over-stretched.
Elsewhere, the U.S. dollar index USD= was flat at 95.83,
with its advance kept in check by investors' strong risk
appetite amid expectations of more stimulus from Europe and from
the United States.
($1 = 0.8731 euros)
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Euro jumps to 4-month high https://tmsnrt.rs/3fN2M7r
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