FOREX-Euro hits new 4-month high after pandemic recovery deal

* EU deal cheered, although largely expected
* Analysts say dollar set to struggle for now
* Aussie, sterling soar as risk sentiment improves
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tommy Wilkes
LONDON, July 21 - The euro hit its strongest level since
early March on Tuesday after the European Union (EU) struck a
deal for a massive stimulus plan to revive their coronavirus-hit
economies.
The hard-won deal - a compromise on concerns that thrifty
northern states had about handouts for more profligate
neighbours - was hailed as an important signal of unity by
Europe's leaders and a foundation for recovery. It sent the euro EUR=EBS 0.2% higher to $1.1470, its
strongest since March 9, though the gains were tempered by prior
market expectations that the deal would eventually get agreed
and the euro's recent run higher.
The single currency was last down 0.1% at $1.1442.
Also supporting broader sentiment, as well as
commodity-linked currencies, were encouraging results from
several COVID-19 vaccine trials. Analysts said that there was little new information in the
final deal to spur the euro much higher, with the breakdown
between grants and loans already known.
Commerzbank analyst Esther Reichelt said that the
"compromise fulfilled market expectations but did not go beyond
that."
"For the time being, no further momentum for the euro can be
expected from either the fiscal or monetary policy side. From
now on, it is primarily the recovery of the real economy and the
development of infections that will determine how the euro will
perform going forward," Reichelt said, adding that $1.14 was a
justified price.
The dollar was flat when measured against a basket of
currencies, and last at 95.813 =USD .
"The mix of the agreement on the EU recovery fund (and the
EU budget) and the news on progress on a Covid 19 vaccine in
Oxford University testing should keep the risk environment
supported today, with the dollar left struggling against its G10
peers," ING analysts said.
Commodity-linked currencies rose.
The Australian dollar gained 0.5% to $0.7049 AUD=D3 , its
strongest since June 10, after the central bank offered few
surprises in minutes from last month's meeting or a speech from
Governor Philip Lowe. AUD/
Lowe said Australia's monetary policy would remain
accommodative for as long as necessary and added that although
he would prefer a cheaper Aussie dollar, its 27% recovery from
March lows was supported by fundamentals.
Sterling also benefited from the broad improvement in risk
sentiment, adding as much as 0.4% to $1.2716 GBP=D3 , its
highest since June 11. It rose 0.3% against the euro to 90.16
pence EURGBP=D3 .
Markets were generally quiet elsewhere, with most currencies
trading in tight ranges.
The yen was flat versus the dollar at 107.31 JPY=EBS .