(Bloomberg) — The euro opened the week on the backfoot after negotiations over the European Union’s shared debt recovery plan continued to drag on.
EU leaders have yet to agree terms on a deal that would offer 700 billion euros ($800 billion) to countries most impacted by the coronavirus, after talks ran into a third day. Though expectations for an agreement over the weekend were fairly low, the delay keeps open the prospect of the plan being watered down.
The euro fell as much as 0.2% against the dollar to $1.1408 in early Sydney trade on Monday. The greenback also strengthened against most other Group-of-10 peers.
A larger euro sell-off is likely to be avoided “thanks to the expectations management,” said Jordan Rochester, an analyst at Nomura International Plc. On Friday, Dutch prime minister Mark Rutte said he saw the chances of a deal being reached over the weekend at less than 50%, while German Chancellor Angela Merkel also played down its chances.
EU leaders are now pressuring Rutte and a handful of his supporters to drop their opposition to a larger proportion of the package being in grants rather than loans. Leaders were still waiting for a new proposal from European Council President Charles Michel.
The Franco-German plan gave markets confidence by alleviating fears of a euro area breakup. That is reflected in the spread between Italian and German bond yields, a measure of risk in Europe, which has narrowed about 75 basis points since mid-May.
bloomberg.com” data-reactid=”25″ type=”text”>For more articles like this, please visit us at bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.” data-reactid=”26″ type=”text”>Subscribe now to stay ahead with the most trusted business news source.
©2020 Bloomberg L.P.